Fiscal Council Report

The latest report of the Independent Fiscal Advisory Council can be read here.

96 replies on “Fiscal Council Report”

That’s an interesting if slightly gloomy report.

It is worrying how sensitive the deficit forecasts are to a 1% fall in GDP growth especially when you consider the fact that the current 2.5% annualised real GDP growth target for 2013-2015 is fairly ambitious.

There is still a significant possibility that if growth does dissapoint and the exchequer deficit reduction targets are missed that the governement cannot return to the bond markets at sustainable rates and we enter bailout 2.0. That would have a big negative impact on consumer confidence which feeds into spending, tax receipts, employment etc and the negative loop begins anew.

As for the suggested €2.8 billion extra in austerity over the next three years, let’s hope that can be achieved through a restructuring of the PN interest payments rather than hard cuts!

Since Karl Whelan hardly ever seems to comment here now, worth quoting his initial reaction on Twitter:

IFC recommendation of more adjustment to meet 8.6%. Worth noting EU-IMF agreement focuses on €-adjustments not GDP %.

From what I understand IMF has never supported mini-budgets if budget off track due to weak GDP growth. Worried about chasing your own tail.

No doubt he will also blog about it.

I dont understand, the authors seem to be contradicting themselves.

“At the same time, most international evidence, as well as simulations for the Irish economy, do not indicate that the current Irish adjustment path is self-defeating in terms of reducing deficit and debt ratios”…..yet….”Council simulations (based on the continued adherence to the rigid fiscal consolidation paths) indicate that an additional discretionary adjustment of €0.4 billion would be required to achieve the GGB target of -8.6 per cent of GDP for 2012”.

Sums up the fallacy of the path advanced by the Council for further fiscal contraction. I dont vote SF/ULA and want Ireland to contiune to be part of the EU and the Eurozone and have always voted Yes to european plebiscites. But Im voting no.

These guys somehow believed in the expansionary fiscal contraction meme despite the massive evidence that this was caused by the 1980s bank credit boom.

The fact is there is a vast embedded project to create a European superstate – it follows that sections of the elite will have loyalty to this project.

From a national economy perspective these policies simply do not make sense but from a Euro perspective they do – they wish to channel capital back into the frigid core and thus keep the monster warm.
If a few fingers & toes drop off from Frostbite who cares ?
They need the monster and the monster needs them.

An interesting article in the Sunday Times sees capital reciepts of up to 500m for sale of 4G licences in 2012. The government have budgeted for just 170m in their forecasts. An article in this weeks Bus & Fin seems to see the govt figure being closer to the mark but if ST is correct will be nice good news story for the Govt….wouldn’t hold my breath though.

I really wish that economists would clearly state what their Economic Model-in-Use is. I can guess or assume what it may be, but that is of little assistance if I wish to have a meaningful intellectual engagement with them about our substantive predicament – declining personal (discretionary) consumption, and a parallel decline in real incomes.

This personal consumption tyhing was alleged to be somewhere in excess of 60% of G*P, and is (again, allegedly) down by 20%. Lets simulate shall we.

That puts that 60% down at 48% (and falling by all accounts). So what is replacing it. “Eh, I don’noh – do You? Do ‘they’?” Please do not attempt to tell me that our Government Critters will attempt to borrow (aka: Rollover) the shortfall.

Some folk are looking at a very unpleasant ‘Come to Jesus moment’ in the not too distant future – going forward, like!

Ah Seamus, it’s the “Irish” Fiscal Advisory Council, not the “Independent” though we all hope it is!

It would be nice if the Council did what the UK equivalent does and issue its own estimate of GDP and in our case GNP.

It would also be nice if the Council gave a clear, yes or no, we think/don’t think that the deficit target will be met in 2012 in particular, and 2013-2015.

The Council’s analysis of VAT in 2012 is interesting, and is being studied, but at least one of the main criticisms of Budget 2012, that VAT estimates for 2012 ignored elasticity of demand, has been addressed.

Well done to John McHale and his colleagues, and I think most if not all on here look forward to a Fiscal Responsibility Act which firmly establishes the Council.

Getting a handle on the numbers isn’t easy. The report says we need a budget with €4.2 billion of ‘adjustments’ to hit the 8.6% target and that this is €0.4 more than what was actually undertaken.

Budget 2012 had €3.2 billion of new measures (€2.2 billion expenditure (€1.4 billion current) and €1 billion of revenue revenue). There was a carryover from the 2011 Budget of €0.6 billion of expenditure measures which gives the commonly used figure of €3.8 billion.

However, there was also a carryover of €0.5 billion of revenue measures. These were included in early accounts giving a projected budget of €3.6 billion for 2012 but were dropped in later versions when the ‘adjustment’ amount was increased to €3.8 billion.

Adding in this €0.5 billion means that last December’s Budget was one that saw €4.3 billion of ‘adjustments’ brought into 2012. The IMF think it was a €4.3 billion budget.

[BLOCKQUOTE]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.[/BLOCKQUOTE]

The Other FARC just released 10 hostages to fortune …

Will scan through this one from the I-FARC before commenting …

Just noting that if the PNs idiotically morphed to Sov we hit 140%GDP pretty pronto – not a good move … nor is May 31 good timing.

Today will also give an indication of whether we are “on target” for 2012. The IMF have set a ceiling of €7.5 billion for the Exchequer Primary Balance at the end of March. The outturn last year was a Primary Exchequer Deficit of around €6.3 billion at the end of March. We are going to be on target!

[As the Promissory Note payment will be excluded this gives a revised Primary Exchequer Deficit target of around €4.4 billion.]

As noted the IMF’s targets are not set a % of GDP and if lower than forecast growth materialises they say:

“… the 2012 targets remain within reach despite the weakening in growth prospects. In the event of significant further reduction in growth projections, automatic stabilizers on the revenue-side should be allowed to operate to avoid jeopardizing the fragile economic recovery as envisaged under the program.”

Of course, under the Excessive Deficit Procedure, the EC’s targets are annual and set as a % of GDP. They take a somewhat different view to the potential slippage:

“Although the fiscal forecasts incorporate some small buffers, a further deterioration of the macroeconomic backdrop could require additional fiscal tightening later in the year, which could have pro-cyclical contractionary effects.”

Can someone correct me on this if I’m wrong.

Has the fiscal advisory report actually managed to recommend cuts of €400m without specifying what their own forecast for GDP growth in 2012 will be?

The Report says on page i) [roman numberal] that

“In Budget 2012, the Department of Finance projected real GDP growth of 1.3 per cent for this year ……. In the Council’s view, the macroeconomic projections in Budget 2012 were broadly appropriate at the time of publication.

I think its worth bearing in mind the November Consensus economics forecast published on November 14th for Irish GDP growth in 2012 was 0.6%. The December Consensus forecasts for Irish GDP growth in 2012 , published December 15th, was reduced further to 0.4%

The report appears to be falling over itself to not offend the DOF. Not a great start for the IFAC.

When are we going to get a credit creation responsibility act ?
What exactly is fiscal responsibility in this monetory medium ?
Its a absurd concept really.

This fiscal fetish thingy is a farce – it seems to operate in a intellectual vacuum – it does not recognize the failed monetory medium.
Even if they somehow manage to save the system…….. the system will continue to eat at this corpse from the inside much like what happened in the late 80s.
They may think everything is gravy once again but the very act of saving “the system” merely increase the possibility of future social collapse on a larger scale.

There seems to be no recognition that the post 1979 experiment has been a complete & utter disaster for the domestic economy.
Our domestic elite seem to be content with larger and larger 1980s type boom & busts just so that we can integrate with the continent.
As if that was a economic goal by itself.

We have a absurd 2 tier economy directly as a result of these European games not despite them.
The multinational scraps and Big FG farmer transfers cannot cover the absurdity of this any longer.


The council is chaired by Professor John McHale (Chair, and Head of Economics NUI Galway). the four other members are Sebastian Barnes (OECD), Professor Alan Barrett (TCD, on secondment from ESRI), Dr Donal Donovan (adjunct professor University of Limerick and formerly IMF staff) and Dr Róisín O’Sullivan (Associate Professor, Smith College, Massachusetts).

Spose one could also borrow a Marxist Economics Professor from the other FARC to bring a bit of balance – I can’t seem to find one anywhere in Ireland!

I note that the IMF is at this stage projecting that NAMA breaks even because of the substantial 57% discounts applied to loans acquired by the Agency. I see that NAMA gets one reference in IFAC’s report today.

Whether or not NAMA makes a profit in 2020 is difficult to project, but it made a loss of €1.1bn in its first year and the betting is that it has made a c€500m loss in its second year (both years after impairment charges).

At what point do we say, well we don’t know whether NAMA will break even or not, but we know we are sitting on losses and the immediate outlook in Ireland isn’t terrific, and we own most of the banks to which a post-2020 NAMA surcharge for losses would apply, so let’s start recognising the bird in the hand.

The key figure remains odious vichy-banking-system debt – on which a writedown would seriously brighten those figs; of course, the deficit needs to be managed sensibly and non-regressively … this elephant is not named ‘Baby’ …

“What we are seeing now is a fight for what is going to be the rest of the 21st century by creating a new kind of class, a new class much like the invasions of Europe a thousand years ago. A thousand years ago, invaders from the north and from Italy would grab land and grab public utilities by military means. But today—ever since the United States went off gold in 1971—aggressors can no longer afford military war. So, what you have today is a new kind of a war. It’s a financial war. You can get by privatisation and financialisation what armies used to get by force of arms. This is not the class war that people spoke of a hundred years ago. It is a financial war. And it is a war that classical economists warned against.

Economic vandalism on a vast scale………. we need a much weaker currency……….. not fiscal cuts.
These guys are much more dangerous then your average Boy from Moyross.
At least they mostly confine their destruction to their local village burb fiefdoms………not to entire nations.
But give them the keys to Dublin castle…………..

What other country halts Police recruitment to save money !!!
What a absurdity this place is.
We need a weaker currency………… unemployment will then disappear.

Lose the fiscal ahaattitude – otherwise this society will enter into a deeper eastern bloc / Romanian like breakdown crisis.

For some reason the return to the bond markets reminds me of the Flight of the Earls. They left Ireland in 1607 to secure an army on the continent and one thing after another happened and they never got back.

Is the FAC prohibited in some way from providing their own forecast? Is their mandate under law specifically in relation to our budget adjustment programme? A macroeconomic document commenting on our budgetary position, without a forecast lacks credibility in my opinion

They call for more sensitivity analyses and fan charts representing risks to growth by the DOF, and I agree. Take a look at the OBR document in the UK, ( easy to read, succint summary and credible (save for the 50% tax analysis borrowed from the HMRC!) The FAC should be providing these types of forecasts though, not the DOF!

The Irish economy grew by an estimated 0.7 per cent in Gross Domestic Product (GDP) terms in 2011, although it contracted in the second half of the year. The return to positive annual growth for the first time since 2007 was helped by a robust export performance, as domestic demand contracted further.

It is possible that there was no actual GDP growth in 2011.


The deficit target is 3% for Ireland by 2015. Not 1.7% and neither (an earlier controversial “model” by the FAC) is it 1%.

IMHO this “warning” by the FAC is irresponsible by apparently making a” big deal” about the possibility (in reality a speculative opinion) that our deficit slippage, in a worse case sacenario, will be 8.9% instead of 8.6% during 2012 because of slow growth/demand in the international economy.

Compare that “slippage” with projections in Holland (not to mention Spain) and such a “worse case” outcome within a tightly controlled fiscal environment is negligible with no effect on our “reputation” or “credibility”.

IMHO, this report is in danger of straying a little to close to “scaremongering” when we bear in mind that most people reading reports of this in the media are not Economists, Political Scientists, Buisiness professionals, or Senior/Experienced public administrators

Perhaps (in light of this report) the FAC should be more concerned about itś own “reputation” and “credibility”. As far as I am currently aware the only other instritution “worried” about Ireland`s “reputation” is the ECB and I will let leave it to readers to estimate how “valuable” that “worry” is.

Within the last 12 months the FAC came out with some other controversial (IMHO) and unnecessary provocation setting out a target of 1% deficit by 2015 the reaction by commentators was very angry and I felt obliged to write something on this site in defence of John McHale`s professional integrity.

I still ahve no doubt about John McHale`s personal or professional integrity but as Chairman of the FAC I think it would,IMHO, be advisable to examine whether the FAC is working for Ireland, understands the concept of careful public information mangement, and whether it is in danger of being unwittingly widely perceived as a cipher.

Judging by some of the inital reactions it may also be good idea,IMHO; for the Chairman to remind the FAC that we are heading towards a referendum which needs to be evaluated on the basis of “informed” opinions not “speculative” opinions. There are plenty of “stakeholders” on either side of the debate who will be “kind enough” to offer “speculative opinions” as the debate progresses.

However at least the FAC by providing this, IMHO, irresponsible report has done us a favour by demonstrating why elected democratic government (with all itś flaws) drawn from all walks of life is clearly much better than a narrow focused “technocratic” type government could ever be. In this regard I am thankful to the FAC.

Perhaps the FAC should consider drawing on expertise reflecting the various disciplines which a nation needs in order to manage itś finances and economy.

Finally Seamus I have read some articles by you in the past in which you have clearly set out our true fiscal situation vis-vis ntional debt/future funding requirements. these assessments by you have allowed me to compared them to other EZ/EU western states which have also have various problems such as pension deficits, high personal borrowings etc. Perhaps you (Seamus) would be kind enough to step in and make a critical analysis of the FAC report.


I am genuinely annoyed by ,IMHO, the irresponsiility of the FAC and this unnecessary (and probably expensive) report . Consequently if by any chance in the process of expressing my opinion about this public disservice I have inadvertently caused offence to anyone please accept my apologies (if needed) in advance. As you probably know I have strong feelings about respect and behaviour in debate/forum discussions and throughout the social media. 🙂


I typed my last post and submitted it following my first post at 12.26 so was not aware that you had “stepped in” and made a comment while I was typing and submitting.

I am reading your comments now.



Minor point:

I would like to have seen the term ‘Regressive’ in the Glossary; one assumes that this omission is due to the fact that the term itself does not appear anywhere in the main text. (I did not expect to find the term ‘odious’, which I didn’t)

Surprising, considering how recent ‘regressive’ efforts at fiscal adjustment impact most negatively on the lower deciles of the Irish population.

One must assume that the critical question of “HOW?” is not included within the remit of the I-FARC.

@John Maynard Keynes

“Has the fiscal advisory report actually managed to recommend cuts of €400m without specifying what their own forecast for GDP growth in 2012 will be? ”

IMHO that is a very good question.

If we are not wrong (or corrected) than the FAC may just have fulfilled its own prophecy of Ireland achieving a negative reputation/credibility.

Engaging a Fiscal advisory body which recommend cuts “just for the heck of it” is not exactly, IMHO, great for any nations reputation.

If I did not know that today was April 3rd I may almost have been tempted to believe that this was (a very immature/irresponsible/expensive) April Fool`s joke.

I’m struggling with the concept of GGD – and its social/ideological/dictatorial/illusory construction …. its hegelian genuine-vichy tensions, and its strange ability to expand dependent on the strength of the breeze from Frankfurt ….

Must reread this paper again from Mr Irwin at the IMF (posted by P Lane recently)

Breaking Newz from Berlin:

Wolfgang Schäuble has just recommended, at an open session of the Bundestag, that the ‘Path of Virtue’ be awarded to the Irish I-FARC.

The German government has long argued that strict fiscal discipline is the only way out of the euro crisis. Now, German Finance Minister Wolfgang Schäuble has come up with a new idea for keeping countries on the “Path of Virtue”. He wants independent panels of academics to keep a close eye on states’ budgets.,1518,825208,00.html


Useful data – merely a slight difference of opinion on interpretation. Enjoy the presentation of the ‘Path of Virtue’ iron crosses in Berlin.

@ D O Donnell

I take it acedemics that promotoe Keynesian style fiscal stimuli policies vill not be velcome on this panel!

Re your 12.51

“The council rejected assertions that austerity is not working, stating that “most international evidence, as well as simulations for the Irish economy, do not indicate that the current Irish adjustment path is self-defeating”.

Austerity is working all right….. 80 year old well run business folds today…

Or maybe
“The only function of economic forecasting is to make astrology look respectable.”

Any chance of some sensitivity analysis? What are the top 5 factors likely to influence the upside/downside 1% together with likelihoods.


Eurozone recession – likelihood – impact on growth
Oil rise to $150 -likelihood -impact on growth

@ Seafóid: “Oil rise to $150 -likelihood -impact on growth”

Oil rise: On track. Progress, slow, halting, but trend is upward.

Likelihood: Inevitable.

Impact: Bad. Aviation will be crucified.

What’s with this rubbish about “our international reputation”? No one in the world of Moolah gives a fiddlers about reputation. Its how much moolah you have – as in a penile dimension comparison contest. Reputation has no value in the world of Moolah – only performance.

@Brian Woods Snr

“Reputation has no value in the world of Moolah – only performance.”


Most significant number..
“The State has spent €2.4 billion so far this year servicing the interest on its debt, up €1.5 billion on same period last year, reflecting the State’s bigger debt burden.” Annualised 9.6b?

Excellent idea. We need a realistic stress test which would also include Brian Woods oil price hike. I see Christine saying the same as Brian today.

@ CP

I think Tull mentioned it elsewhere re Peats – any chance the whole online distribution model has hurt them too?

@Bond Eoin Bond
Obviously online accounted for some of the fall in turnover but a reduction in turnover of 50% from 2007 to now probably reflects more on austerity. Look at Game..another casualty of austerity.
But I agree..the whole electronics retailing model is set for major change..Bestbuy closing 50 massive stores last week despite its major competitor going bust last year.

@DO`D 2.26 pm

re your link to spiegel article

“…responsible for sending a warning…”

I wonder what Wolfgang thinks of his “new idea” if he has read the kind of “warning” our panel “of academics” has come up with which appears (but am willing to be corrected if I am wrong) to run along the lines of :

“We have no idea what is going to happen but cut spending anyway.That way our guess has a better chance of being correct since growth is definitely guaranteed to slow if we take more money out of the economy for no reason other than we are feeling pessimistic”.

By the way does anyone know whether the members of the FAC receive an additional salary on top of their “day job” apart from sundry expenses and whether their attendance at meetings and other work associated with the FAC is “docked” from their annual leave?

This report basically doubles-down on the recommendations given in the last report – faster, larger budget adjustments. It recommends a 25% increase in the planned budget adjustments from 2012-2015 (€15.6bn vs €12.4bn)

I am intrigued by the way those who recommend faster/deeper austerity always refer to lower growth as a “surprise”. Given that the country is now in recession again on a quarterly basis, how many times do you have to experience the same “surprise” before it ceases to become a “surprise”?

In dismissing the concept of “self-defeating” fiscal adjustment, the current plan is compared with a scenario of no fiscal adjustment since 2008. Why? Who actually recommended/is recommending no fiscal adjustment? Why not compare different rates of adjustment? The only reason to compare with an extreme scenario, rather than plausible alternatives, is to bolster the case for current policy.

The report makes a nod towards avoiding pro-cyclical policies by considering whether targets should be specified in terms of adjustments rather than GDP ratios. In my view this would be a first step towards a more realistic policy where actual growth levels and rates were used to modulate such targets on an ongoing basis. However the report then cops-out on this issue by failing to recommend it. The argumentation is extremely weak here. The first argument is that it is not possible due to “creditworthiness” – which is basically saying “we know what the markets want, and know that the markets don’t want this concept, therefore we cannot recommend this concept”. There is plenty of evidence that the markets are concerned with the overall EZ approach, and its lack of balance and the deep enmeshing of banks and sovereigns. A small step towards a more workable solution based on sound economics is likely to be welcomed. The second argument is that there is already a bailout agreement, thus the argument amounts to “since the current plan does not include this concept, we cannot recommend this concept”.

I have been complaining for some time about the “linear” nature of the model used for the relationship between budget adjustments and debt/deficit targets. This is highlighted by Figure 3.3c, which shows such a perfectly linear relationship. For every 1% of a negative growth “surprise”, there will have to be another €5bn adjustment to meet the 2015 target. Repeat as necessary. Automatic correction mechanism, here we come…..


Debt repayment was the final line in the IT piece! 10Billpa (at the mo) at the mo! & looks like more ‘creative accounting’ coming up on the PN to Sov EFSF deal. &all will ‘count’ on the 1/20 after the ‘fifth Irish bail-out’


Wolfgang also wants a new Olly to have unilateral plenipotentary powers on ‘fiscal matters’ to crack the whip on the ‘Path of Virtue’. [link on earlier Senior Bond Consultation thread]


Rumour that you are a clone of a cross between Donal Donovan & Lorenzo Bini Smaghi! Naw – I don’t believe it.


Link is above on the Path to Virtue post –

Schäuble’s ministry is also proposing that the role of the EU’s economic and finance affairs commissioner, a position currently held by Finland’s Olli Rehn, be strengthened in the future. According to the ministry document, the commissioner should be able to implement EU regulations “without the other commissioners or the Commission president having the right to object.”

Heavy! Really Heavy! Bleed1n Roight Heavy!

Time to call a Halt to this Galloperin_Lunacy. Nein Nein NEIN!

Whither democracy? Blind Biddy “ain’t wearin no h’Angela’s Korset” – or so she says; I simply take her word for it, empiricism has its limits you know!

While NAMA may get only one reference in the report, it is at least one more reference than the Fiscal Compact treaty gets. It seems the authors live in a world where this treaty does not exist. Such a world, would be, no doubt, a better place, however reality intrudes.

The last IFAC report spent considerable time discussing the problems with using the structural deficit as a target. Since then this unmeasurable quantity has increased in importance, not decreased, due to its prominence in the Fiscal Compact treaty. However in this report it is hardly mentioned at all, other than a reference to the “well known difficulties of measuring the cyclically adjusted budget balance”. Why? Too inconvenient perhaps? Why is the Fiscal Compact treaty not mentioned at all? Too inconvenient, perhaps? A fear of writing anything down that could be construed as questioning the wisdom of the economics of the treaty? A fear of upsetting those responsible for current policy?

During the Fiscal Compact treaty negotiations, Eamonn Gilmore said public discussion of the treaty was “not helpful”. It seems the IFAC agree.

@ CP

I heard a Swiss economist last week say that if oil goes to $200 the EZ will be sucked into a depression (which BTW would not be ideal for Irish exports)

Am I reading those figures right.. Tax take up 1.2b,debt service up 1.5 b= -0.3b negative outcome?

The PNs should be shunted off into an LTRO SPV at 1% and paid off when the country is back on its feet. Expecting Ireland to pay them off now is a joke.

It is getting to be a complete waste of time to read the Irish Times/Irish Independent if you want to understand what is happening. Last week marked a new low (“Chinese to invest billions”, “Coup for Noonan”, “No cash payment”, “ECB blinked”, “Bank support cost halved” etc. etc.). As pointed out by others, some of these stories would have made 1980s Pravda editors blush. The subtext in both those newspapers that every story has to be spun so that the sheep are herded into the right pen has now completely taken over from any attempt at accurate reporting of what is happening.

Non-Irish sources are much better – FT Alphaville are on top of the Exchequer deficit figures with their Now you see the promissory notes in the deficit, now you don’t article.

J M Keynes: ”the report appears to be falling over itself to not offend the DOF. Not a great start for the IFAC”

– that was certainly the impression given by their representative on this eve.’s news. The story has been placed contrastingly with Noonan’s ‘good news’ (though seemingly the 10% improvement on last spring’s echeq. returns have been partly acheived by differences in how PRSI and corporation tax have been accredited between the same periods in ’11 & ’12), and he downplayed the report’s warnings as having received overemphasising for the sake of headlines.

As for the referendum bribe referred to above, is there any indication any of you can draw from it either pos. or neg., isn’t it just a spreading of the butter to the hither end of the baguette, as it were ?

The 70s was nothing like this – its a depletion monster and a sustained rise, not a spike.
There is no national / EU like effort to solve this problem as the goverment levers have all been outsourced.
Even a Pragmatic Moneypoint operation . (it morphed from a Nuclear effort) seems not on the cards.
At the very least they should have a Midleton size team in constant rail building operation…….. if they have to strip it from the road repair budget they should just do it.
We must depreciate the roads to build the rail lines just as we depreciated rail to build roads as the energy & monetory dynamics are so much different now.
I have highlighted Youghal & the western Limerick suburbs as a obvious choice given the population rises and intact line to shopping centres & Industrial estates but there appears to be little concept of Elan in goverment circles.
They really think the physical economy is the credit banks.

@Ceterisparibus et al.

The solution outlined in the RTE article appears to be exactly the same as the solution that has already been agreed and is currently being implemented for recapitalizing Greek banks. Of course this is not mentioned (see my previous post) since an such solution will be pitched as the outcome of “tough negotiations” between Noonan and the EU, rather than simply the replication of a solution that has already been implemented elsewhere (similar to the “negotiation” of the lower interest rate on bailout loans.)

For Greece, the EFSF is going to issue up to €48bn in EFSF bonds (on a non-cash basis – i.e. for no consideration) and transfer them to the Greek HFSF (bank resolution authority) who will transfer them to Greek banks who will repo them with the ECB. Greece will pay back the EFSF over a long time period (the actual details of duration and interest rate don’t appear to be readily available yet). Presumably all the current ELA extended by the Bank of Greece will be paid off.

In fact the EFSF will issue over €150bn of such “non-cash” EFSF bonds to support the Greek bailout (e.g. the cost of the PSI “sweetners”, temporary collateral for the ECB etc). Basically the EFSF are printing up new bonds, which will find their way to the ECB to be exchanged for new money, which will be used to recap the banks and cover the costs of the PSI. In Ireland’s case I doubt whether the deal can be completed in six weeks, but I would expect a political commitment to be conveniently announced in the run-up to the treaty vote, with the actual agreement to happen later. Headline writers will be reaching for their dictionaries to try and convey the superb job the Irish negotiators did, rather than the rather more mundane “I’ll have what he’s having” reality.

@Bryan G
Thanks for info. I agree that reading the Irish Papers will only give you a distorted view of the reality of our predicament. And they appear to be getting worse.
Can anyone enlighten me on the current government-debt. We see from the figures today that the annualized cost of interest is 9.6 billion. At an average interest rate of 5% that would imply we are servicing just over 190 billion of debt…and rising.


The IFAC report contains the Budget 2012 figures – for 2012 to 2015 the gross debt is estimated at 183 -> 196 -> 203 -> 206bn.

Cormac Lucey had a great post a few weeks ago about projections for 2011 growth and how they were gradually revised down over time as reality kicked in. Someone mentioned Gurdgiev who calculated the debt overhang as taking 2.1% off annual growth.

Economists are prone to the confidence fairy thing where all sins are forgiven starting 2 years from now and rollicking growth resumes. This is similar to the attitude of the Irish Times property section who have been calling the turn in the market for the last 4 years now. The debt projections of the various bodies that feed into the Fiscal Council’s summary also also appear to be faoi gheall den confidence fairy. What are the big ifs they throw into those spreadsheets ? Can they be identified and monitored ?

Or will Ireland just arrive ar 2015 and be totally surprised by a deficit of 7% ?

@Bryan G

But these are not the ‘real gross’ … one needs to trawl through all the ‘creatives’ to arrive at a ‘real’ – e.g. the illusion that PNs to EFSF_sovvie lite are not GovDebt etc I’m not an accountant, nor a forensic accountant, let alone a creative accountant … all I know is that poor sods of citizen serfs, and lower echelons in particular, pick up the tabs and suffer the consequences …

@David O’Donnell

Agree – they are just the Eurostat GG debt figures. There are liabilities (e.g. NAMA bonds, ELA, bank liabilities under guarantee) and assets (e.g. NAMA assets, bank assets) outside this view. The “no cash payment by the government on the PN” trick from last week only works if you ignore the bigger picture that includes NAMA.

I note that the IFAC takes a very narrow view and only considers the Eurostat figures, and not the bigger picture, which I presume would be looked at by the markets, particularly as the sovereign and banks are now very tightly coupled.

… a little more from Micheal Hudson linked above …

(c. 30:00) “The commercial debt is expected to be repaid; and it bears interest. And, as this commercial debt has grown—the mortgages, the bank loans to companies, the corporate raiding debt—this has loaded down the economy with an enormous debt overhead. The more money commercial banks lend, the more interest has to be paid to carry this debt overhead. And the problem is that money that is spent on paying banks debt cannot be spent on goods and services. So, the result is that when commercial banks create debt, you have a diversion of income away from spending on goods and services—to pay debt service—and that is known as debt deflation. And when debt deflation proceeds as long as it has today, we move into a late stage of finance capitalism, which is the debt deflation stage—the austerity stage. And that’s the stage that Europe finds itself in today.

This is the PN EFSF ‘deal’ – more debt to pay off more odious debt and more interest to be paid off each year into the Eternity of the Fiscal Corset ad infinitum


2015 we hit 150-160% of GDP when all the creatives are included #approx – quelle surprise!

For all those bitching above about forecasts (and do note that IFAC comments on government forecasts, especially pre-legislation, is not pressure-free), there is a very handy link buried in the comment (1) below which was lifted from last July.

There is also a response (2) from Gavin K, dredged up so he can see how his the back of his envelope is doing, against the competition:

(1) “Really really off-topic – but real classic bear-turd-found-in-arboretum stuff, and a must read for John McH now he has returned from the international space station.

Every one will be shocked, shocked! by just this one paragraph:

“Republican OMBs overestimate inflation while Democratic OMBs overestimate unemployment. Italy is the most optimistic forecaster in the eurozone — though the corresponding paper was written without knowledge of Greek statistical practices. The UK, Finland and Sweden on average exhibit pessimistic bias. The UK and Sweden, of course, were not trying to get into the euro.)”

“Unsurprisingly, optimism bias is more pronounced during boom times. But Frankel also found that it is present during busts, too. ”Evidently official forecasters… over-estimate the permanence of the booms and the transitoriness of the busts.”

“We’d also add that bureaucracies aren’t free of ideologies or perverse incentives. A desire to please a boss or a bout of analytical groupthink may also lead to optimism bias. In this, it helps to have strong think tanks such as the UK’s Institute for Fiscal Studies for challenge and accountability functions.”

Its almost as if being cynical, isn’t.”

(2) ” @ Eamon Moran and Grumpy

This from “The Irish Economy in Perspective June 2011 Department of Finance”

P. 33 (where there is also a nice chart)

“Following a contraction of 1% in 2010, there is now a broad consensus that the Irish economy will return to annual growth this year. While near-term prospects remain subdued on the whole – reflecting significant headwinds on the domestic front – a strong export performance is expected to translate into GDP growth of around ¾% in 2011 and 2½% in 2012 (see Chart above).

Turning to the medium term, the Irish economy is forecast to grow on average by 3% per annum over the period 2013-15.”

So 0.75%, 2.5%, 3%.

Applying yer man’s average ‘optimistic tendency’ of +0.2, +0.8, +1.5 (years 1, 2 & 3).

We get a prediction of 0.55%, 1.7% and 1.5%

Can’t wait – must come back and check.”

On the ‘groupthink’ phenomenon, I note that Lucinda used the phrase “in the government’s mind” last week. Does Gavin’s envelope have a view on that?

Anyone see Brendan O’Brien on Vin Browne show last night? At one stage he mentioned that he got a one year contract with Independent newspapers to set up an investigative reporting unit. At the end of the year he was taken aside and told that they could not run with certain stories that were “critical of government” because the owners of the paper wanted to be “nice” to government as they were trying to get some “exploration licenses”. Says it all really.

Ditto a lot of our economists who have to be nice to the hand that feeds them. Being nice means interpreting statistics favouably, giving the benefit of the doubt, pulling on the green jersey even though it is moth worn. As Grumpy alluded to in the Cormac Lucey blog the practice of wearily forecasting “optimistic” growth for 3 years down the road only to relentlessly reduce the forecast as reality explodes the myths one by one. The ESRI are among the worst offenders but the usual suspects always have their finger prints all over the crime scene,

For that reason alone what Constantin and what Morgan Kelly say has extra weighting because we know they have not given an inch in the battle of the statistics. For me personally, who is saying what and what camp they are in is all that counts. Are they trade union economists? Public Sector economists? Quango economists? Academic economists covered by trade union agreements etc. We have to look at the jersey. Even the Fiscal Council has to be weighed in the balance. Why no dissenters from government policy on the council?

Yip , I saw it – he seemed to get a little nervous as he walked his way through it………legal eagles watching I suppose.
There is a lot of dark holes in this kip.

@ All

Two articles (Brendan Keenan and Dan O’Brien) that say it all.

St. Augustine comes to mind with regard to the attitude of Minister Noonan.

Another quotation from today’s Indo on the reply of Hemingway when asked how he had gone bankrupt, replied “first, slowly, then suddenly”.

@RB: “Are they trade union economists? Public Sector economists? Quango economists? Academic economists covered by trade union agreements etc.”

Eh, I just think (as a scientist cum economist) that they are using deeply flawed models based on Helium filled logical axioms. They ignore the empirical evidence – like it was a second-hand dog turd. It is skipped around – observed evidence being a tad inconvenient and all.

On the Group Think bit. I have often observed the personality dynamics of meetings. One, determined, immovable critter, with Grade A evidence will either carry the group, or be slimed – literally. Depends on the Tom Cat or Catess, in the chair. The sychophants are immediately obvious – they start their commenties by ‘agreeing’ with the Chair – yet never ask a searching questions. So if you want compliant folk: pick them out of your barrel, not off the neighbour’s tree! Ideology and sentiment always triumph. Regretabbly, we now appear to be in the thrall of a group of Slimeballers. Best keep a safe distance.


St Jude would seem to be the man for the job when it comes to the
economy. Otherwise pray to St Anthony if you can’t find any growth.

@ Ceterisparipus

“Obviously online accounted for some of the fall in turnover but a reduction in turnover of 50% from 2007 to now probably reflects more on austerity”

I think you may be forcing the effect to fit your cause – I can’t find any evidence that the reduction in turnover is primarily reflective of austerity. Peat’s themselves blamed a combination of: (i) recession impacts; (ii) unsustainably high rental costs; and (iii) a changing marketplace in which online shopping was eating into high street retailing ( I also heard an academic on the radio yesterday who blamed their high-street locations (rather than cheaper out-of-town like competitors) and expensive high-service level model (which is less relevant in the internet age) as the primary drivers of their demise.
Another chief driver is the continued and massive deflation in electronics goods which mean that people need to spend much less of their take-home pay to get the same number of TVs/toasters. If you look at the CSO stats on Retail Sales of Electrical Goods, while the value of electrical goods has fallen by 35% from 2007 to 2011 (index from 115.7 to 75.6), the volumes have only fallen by 4% over the same period (index from 136.5 to 134.2) and in fact were up by 8% in 2011 over 2009. So people are buying almost the same number of items, but getting them for cheaper.

“ Look at Game..another casualty of austerity.”

Game had 1,275 stores in 11 countries. Somehow I doubt that the c.1% of the portfolio in Ireland had much of an impact on the company’s receivership. Once again, it’s the changing nature of the retailing model to online that has driven this company into the ground.

My heart goes out to the people who’ve lost their livelihoods in both of these cases and I don’t think that using them as a convenient clarion call against austerity is accurate or helpful.

Ireland’s problems may have to be reset in the context of the Spanish bond auction this morning which did not fare well.

Spain absorbs the GDP of Ireland, Portugal and Greece together. It has been falling off a cliff for several years cracks papered over courtesy of credit and a property bubble. If it goes for a bailout, it will be a ‘game changer’.

The real fear I have about the implications of all this talk of recovery is that someone of significance in Europe will choose to believe it. After that it may be a case of good, that’s less aid and more of a cold shoulder for Ireland.

Be careful what you wish for.

@Edward V
I am very sceptical of consumer product indexes……. they can be modified over time I guess although I don’t know their Methodology.
Unless its for something simple, large & common to most people lives now such as car purchases.
Having said that places such as Mahon shopping centre (which is in a more prosperous area of Cork) is dishing out savage competition to the centre of town with small shops closed all over the place.
Perhaps Patrick street rents & around are a problem ( I don’t know really …. John Corcoran ?)

Anyway the EMU / Euro phenomena of external goods being priced cheaply needs to be reversed if we are to have a more sustainable domestic economy.
The huge cultural change away from the Pub pint & local chat to electronic Grot consumption can be partially explained via the strange euro monetory envoirment we live under.
We are but lab rats to those with the power.

@ grumpy

Thanks for bringing that back up.

The website has repeatedly eaten my lovingly constructed replies, so very briefly this time the ‘envelope’ using the optimist corrector, seems to show that the DoF is even more optimistic than international averages.

I don’t want to risk links again, but the table on P.4 of the DoF January 2012 Bulletin is useful in this regard.

@ Bryan G at 6.17pm

Also a very good post. I think the IFC is now giving itself room to manouvre, but it will be a much happier situation when it is properly brought into being.

The Irish Times reporting today seems particularly all over the place.

Not impressed at all by this FAC report which, in my humble opinion, does a great disservice to our economy. It will be cited by those critical of affording us any debt relief. It is based I believe on a dangerously incorrect and false set of assumptions regarding the economy.

Firstly, it could do with some housekeeping and cleansing. Occasionally it refers to international research in support of assumptions without indexing and references to verify the assumptions made. For example, “As reviewed in the October 2011 report, the most authoritative international evidence does not tend to support the EFC hypothesis.” Show us the evidence. With the economy driving towards the edge of a cliff, it advises foot down on the accelerator: ”

“Given the continuing fragile nature of Ireland’s creditworthiness (despite some recent improvement), it is important that, if necessary, measures be taken to ensure that the General Government deficit target of 8.6 per cent of GDP is adhered to.”

No Spanish Rajoy sitting on FAC it seems, all steam ahead for austerity.

The report dwells a lot on GDP without any sectoral data evidence to delineate the statistical meaning of the term on a sectoral basis. It therefore drops into the illusion that growth can be measured strictly in terms of GDP. The report does draw attention to uncertainty but is unfazed:

“There is a broad based belief that growth will gain momentum in 2013, due to an improvement in the global economy and a gradual pick up in domestic demand.”

“The consensus forecast is for real GDP growth of around 2.0 to 2.4 per cent in 2013, with net exports again considered to be the main positive element”

Occasionally the report does contain good data. I was particularly interested in the spectacularly incorrect forecasting of the ESRI between Winter 2010 and Winter 2011 . I presume the source for eg Figure 2.2 R e v i s i o n s t o 2 0 1 1 a n d 2 0 1 2 R e a l G D P G r o w t h F o r e c a s t s is FAC. Other graphs are sourced from CSO and Department of Finance Exchequer Statements.

Lacking deeply mined data on GDP it was impossible to eg examine the agri sector. Data from CSO is available upon which to make an analysis, but this opportunity was not availed of. To illustrate the difficulty this poses, consider the performance
of eggs. If world prices increased over 2011 by a factor of 100%, but the production of eggs fell by 40%, eggs would still yield a 20% increase in revenue over the previous year.

There is little in the report to examine the effect of migration patterns and unemployment.

The following recommendation by FAC is nothing short of a disgrace:

“”Nevertheless, the Council continues to believe on balance that there is a strong argument for greater consolidation than currently envisaged by the Government. This assessment takes into account factors such as the deterioration in the growth outlook, some improvement in Ireland’s creditworthiness and a less ambitious budgetary target for 2012 than that underlying the Council’s October 2011 analysis. An alternative adjustment path would involve cumulative additional budgetary adjustments of the order of €2.8 billion compared with those currently envisaged by the Government. ”

The above deeply erroneous view is a gift to Bundestag members’ desire to roast Ireland and on the basis of a critical lack of data mining, prejudicial and overly optimistic growth forecasting that is flawed; if acted upon, will do deep damage to the economy providing little evidence for any relief to Ireland’s penal debt burden imposed on it by the Troika.

(Those of us who were dismayed at the annual growth projections of 3% that were used by NAMA supporters on its setup as we conservatively read correctly the 10yr downturn following 2008 had no problems with certainty). It appears FAC are covering their backs in extensive use of ‘uncertainty’.

But Troika, Govt, ECB will be pleased at the overall conclusion that Ireland’s economy requires the imposition of further austerity. I’m sure they may even consider raising the interest rate on any future EFSF bond to replace the PN to help with this FAC purging of the Irish economy !

@Colm Brazel

But Troika, Govt, ECB will be pleased at the overall conclusion that Ireland’s economy requires the imposition of further austerity. I’m sure they may even consider raising the interest rate on any future EFSF bond to replace the PN to help with this FAC purging of the Irish economy

I am sadly too busy with my real job at the moment to face the FAC report in full but it does rather seem as if it was written from the point of view of Ireland’s creditors.

How can we best serve them? Should we consider eating the poor – there are no studies indicating that eating the poor worsens our debt outlook after all.

I think the reports conclusions partially stem from cognitive issues – where the rest of the world sees things getting worse the very serious people of the FAC instead see a negative rate of things getting better – hence if we follow the current approach with more vigour the rate of improvement will become positive. We’re saved.

Also, Bryan G captures the Angela in Wunderland aspect of the modern equivalent of the Treasury view in European economics very nicely.

I am intrigued by the way those who recommend faster/deeper austerity always refer to lower growth as a “surprise”. Given that the country is now in recession again on a quarterly basis, how many times do you have to experience the same “surprise” before it ceases to become a “surprise”?”

Outside Europe they really do see the economic consensus here as deranged and cult like, but then Europe has historical form on that kind of behaviour. This will not end well and there had better be a plan B in government circles not informed by the austerity to meet odious debt “plan”.

@Shay Begorrah

“Should we consider eating the poor ”

There is of course always the Soylent Green option for those pesky pensioners.

But back on topic….. Did I just read (glance – someone who was reading it held it up for a second) on the front of the commuter newspaper ‘Metro’ that a government spokesperson claimed there was no problem because the FAC were using data that is at least a month out of date (I presume he meant as in lagging behind whatever data set the government use).

Is it just me or does that sound a bit cack-handed? Surely the least we can expect is for government and FAC to be commenting on the same data set at the same time?

“They don’t know what they are talking about because their data is out of date/no longer valid” is one of the oldest tricks in the book……

Or is this just a case of the Metro making it up? I haven’t had chance to sit down and read the daily intake yet.

I hope the Metro weren’t making up that story about two of Cardiff’s top players being unavailable for selection this weekend. When I go to the trouble of paying such ridiculous money to watch Leinster at the Aviva I at least expect them to win!

The credit write downs website as given time & space to various plan Bs put forward.
But I have my doubts this goverment has requisite tackle for it given the fact it wishes to privatise more voluntery tax raising measures such as the National lottery in the interests of a destructive ideology.
What was the revenue stream for the lottery again ? 200Millionish (correct me if I am wrong)

Gentleman we have a Monetary Mental disorder……. its not fiscal flatulence.

Back to those ‘Regressives’ aka Scalp the lower order serfs …

Fiscal treaty will increase gap between rich and poor

The survey also showed the deprivation rate as 22.5 per cent – that is nearly a quarter of all households.

And the forms of deprivation concerned is what most readers of The Irish Times would surely regard as elementary: being unable to afford heating; a morning, afternoon or evening out over a period of two weeks; two pairs of strong shoes; a roast once a week; a meal with meat, chicken or fish every second day; new clothes; a warm, waterproof coat; an adequately warm home; to be able to replace worn-out furniture; to have family or friends for a drink or meal once a month; to buy presents for family or friends within a year.

But we remain a relatively rich country. The average income of a household of two adults and two children was €59,512 in 2010. That is after all taxes are paid and after social welfare benefits are received and, even though this showed a 5 per cent drop from 2009, it is still a very adequate income.

The problem is that the income is so unequally distributed and the classic contemporary justification for using the income tax system to make appropriate adjustments to income is that income tax is a tax on jobs. But income tax is a tax on jobs only if people expect to be paid not just a fair income but an income that additionally “compensates” them from the distribution of high incomes to people with lower incomes.

From Reuters:

“German officials have urged Hollande’s camp to drop the term “renegotiation”, which triggered alarm bells in Berlin, but they were told it was necessary for the election campaign.”

Nice to see the Irish leading the way in Europe again.


But I have my doubts this goverment has requisite tackle for it given the fact it wishes to privatise more voluntery tax raising measures such as the National lottery in the interests of a destructive ideology.

I have always been against National Lotteries but privatizing the operation of Ireland’s tax on the poor, the miserable and statistically challenged is yet another poor show from a Labour minister.

It is entirely keeping with the new national mindset, I thought at one point that the usage of Vichy government to describe the now less than autonomous peripheral governments was hyperbole but we are coming down with Marshal Petains now – basically decent people who have become so disheartened by the odds against them that they essentially become collaborators.

It is awful and sad, the Irish Times will no doubt spin it as an innovative new way of raising capital now that the old progressive ones are needed to service private banking debt but it fills me with a combination of pity and contempt for our “leaders”.

@ Bryan G “The IFAC report contains the Budget 2012 figures – for 2012 to 2015 the gross debt is estimated at 183 -> 196 -> 203 -> 206bn.”

@ DO’D, Seafoid: “2015 we hit 150-160% of GDP when all the creatives are included #approx – quelle surprise!”

It’s a fairly easy prediction that it will be far worse than than by 2015. Add on for instance the huge negative mtm adjustment still required by the Irish banks…..You will also recall the CentralBank warning report of last week, flagging the risk of further downside performance. Existing writeoffs and provisionsing levels are a fraction of what is required. This following example will becomemore common:

While I note the comments re bias, etc, the Fiscal Council approach also seems to be informed by some basic capitalism i.e. if the outlook is uncertain and even bad, slash costs now to a sustainable basis so that, if possible, something of Ireland Inc. survives into the future. For me, the Fiscal Council Report is another warning flag that downside risks are substantial. Little else.

@ DO’D: “But we remain a relatively rich country. The average income of a household of two adults and two children was €59,512 in 2010. That is after all taxes are paid and after social welfare benefits are received and, even though this showed a 5 per cent drop from 2009, it is still a very adequate income.”

Income? For many in Ireland nowadays, its ultimately EU welfare, even if there is ‘daily work experience programmes’ for the majority to keep people off the streets.

@ grumpy, et al

Another go on a computer that works.

If I crudely reduce the FT article and paper that you link, it suggests that on the whole government GDP forecasts are overoptimistic (AKA wrong) by 0.2%, 0.8%, 1.5% in the years one, two and three ahead.

At end of 2011 the DoF forecast GDP growth as 1.0%.

Adjusted for ‘average optimism’ this should have come out at 0.8%.

According to the CSO it was,in fact, 0.7%.

So you could say that in this case the DoF was more than averagely over-optimistic.

But I was thinking that the over-optimism quotient – or whatever it could be called – could be better expressed as a multiple than a number.

So 2011 growth was 0.7 * what was forecast.

Starting again in 2012, the DoF has a current growth figure of 1.3% (no sniggering).

If we just take off 0.2 we have an ‘optimism adjusted’ figure of 1.1%.

But if we use the multiplier instead we have 0.7 * 1.3 = 0.91%

This looks more like it to me.

I also expect that the DoF will adjust down during the year, and I can track accordingly.

If I have time and have not bored the pants off everyone, I could go back and find what multiple the DoF has been out for in any given year.

Also to note, this is not just a national problem – see the constant ‘unfortunate’ downward revisions for Greece, Spain, Portugal, etc.

Possible upside plusses include:
* The impact of a growing USA economy being greater than expected.
* The relative challenge by Italy, Spain et al against immediate austerity all round being successful and Ireland being part of that
* Stimuli of various kinds being provided
* A real restructuring of the PN that reduces debt
* Introduction of proper ESM and Euro Safe bonds or similar.

Possible downsides
* None or not much of the above and Ireland continues down the austerity hell-hole, plus
* The UK Conservatives making a complete haymes of it as they usually do.

On the whole, the envelope suggests looking at GDP growth of 0.9% in 2012 with mainly negative. See you in a year.


‘Vichy’ is a most appropriate descriptive ….

And it has become embarassing to observe Labour Ministers turning themselves inside-out in futile attempts at projecting justifications ….

@The Labour Party [text from Blind Biddy …

Do the decent. Pull the plug and let the Vichy_ites in FG engage the rump of FF. Get with the opposition, plan the default on the odious, and reposition the primary position of The Irish Citizens’ Army.


I watched a recording of an interview which John McHale had with Brian Dobson ,RTE news, yesterday evening about the IFAC report. Unfortunately I do not “do” links but it is worth watching.

I hope we have all learned from this discussion in the aftermath of the IFAC report and bear in mind that fiscal management (and advice) is currently a very delicate “balancing” act. in Ireland.

Best…L 🙂

P.S. I see that a thread on a new book :”What if Ireland defaults?” has opened up which should be interesting. IMHO it is good we are not afraid to discuss a scenario which I personally feel (if it occurred) would not arise out of economic necessity but as a pre planned uni/multilateral political decision. However I could well be wrong and look forward to learning more.

Hopefully after that we can have a thread with some discussion/analysis of the latest Irish unemployment figures now that the census has revealed actual population statistics.

@ Georg R.Baumann

Thanks for the interesting link.

On the conclusion;

“Up-front gradualism must be the name of the game. And adjustment must be wedded to a growth strategy. Revenue will grow consistently only if the tax base – that is, the economy – grows. And that growth requires higher public investment in infrastructure and human capital.

The guardians of orthodoxy are not about to put forward such a growth strategy. Will anyone else?”

Such a growth strategy is going to be put in place provided the European leaders can agree on how to fund it.

As to “gradualism”, the authors of the fiscal report correctly point out that very different outcomes are possible and it is wise not to close any doors. This is advice that should be followed. Even if it is not, it seems to me that the fact that the discussion is taking place at all is an advance on the previous situation.

@Paul W

It looks like overreaction..but I suppose Rajoy didn’t help when he is reported by Bloomberg as saying tht they are in “extreme difficulty”.

@ CP Spain is in melt-down. A very different proposition to Greece, Portugal and Ireland combined.

Sold some property there 5 yrs ago, at a loss….have been due a refund of tax for 5 yrs….Will never see it. Bills outstanding, everywhere e.g. not paying for drugs, income tax refunds, etc, etc either.

Then, far worse than Ireland, their accounting practices are dismal. In the property area, they are in even far worse shape than Ireland.

When Rajoy says “extreme difficulty”, I think he means it….

Does anyone have a sense that we are facing into another global crisis soon….? Perhaps this article /series has coloured my thinking today by being a bit over the top, and timing of crises is not easy to predict:

In the meantime, we have Ireland Inc. obsessing about the narrow fine technicalities and the importance of being “earnest” and much ado about nothing…particularly many of the senior economists. One post stands out – that of Cormac Lucey in the last week re consistent downward revision of Irish forecasts plus the inevitability of debt restructure once the crs reach acceptance. I like the comment made by someone re Morgan, Constantin…and I would add, Cormac standing their ground on the stats, with integrity. In the meantime, Official Ireland looks hellbent on riding the country into the ground without thought or proper consideration of alternatives.

@ Paul W
Look at the record of the experts in Ireland. The DoF the ESRI the Central Bank and the Financial Regulator. All AWOL during the fermentation cycle of the crisis and have not stopped lecturing, barracking us since with equally bad ideas. The culture that prevailed in these organisations still prevails.

In Europe, at the moment, we have elections at the core France and Germany. In the US we have another presidential election. Elections are the siren calls for statistical blitzkrieg and that is what we have been given. Elections are when the spin merchants and the “experts” are supposed to earn their crust and show their loyalties to the hand that feeds them and that is precisely what they do. Economics has more quack theories, more renegade economists and more conspiracy theorists than what came out of the wood work after 9/11.

However, that said, the US statistics in the Zerohedge links are simply mind boggling. If people can believe that the the US economy has avoided falling headlong into a pit of disaster, then they are obviously also well capable of believing that Ireland can survive with debt to GDP ratio’s of 260% in 2015- 2016 much of this is already there but not “counted” because of accountancy cheap shots or ‘conventions’. Whether something is counted in or not does not make it “really” disappear. t is still there, it still has equal claims on the public purse as does the interest payments on all this debt pile. Meanwhile, when will the next downward revision of our growth rates be? On Constantin’s site there was a post recently that showed that Irealnd’s balance of trade (used to herald the export led recovery) was based on exports that only increased by 3.2% between 2007 and 2011 but that it was Ireland’s imports that had decreased by more that 31% during the corresponding period. We are love bombed with the former figure but never hear a tad about the latter statistic.

Am I the only one that finds it ironic and slightly nauseating that Michael Noonan says (Jan 11th) that any talk of Ireland requiring a second bailout was “ludicrous” signed a codicil to the treaty that stopped us accessing ESM funds (bailout 2). Then his government turns around and tells us we are all screwed if we don’t vote “yes” as it would prevent us accessing, “Ireland’s insurance policy”i.e. ESM. The Fiscal C is about getting another bailout and like Greece Ireland will pledge anything to get its hands on that money.

@ Robert Good post. Thanks. The whole accounting discipline is undermined (still). One of the biggest examples of accounting dysfunction during the Credit Crisis was (and still is) the OBS securitisation SPV…..suddenly couldn’t be separated from the promoting bank(s)….or sovereigns nowadays…certainly in Ireland as the Sovereign now has all the bank crap on or OBS. All sorts of OBS NAMAs out there still. The leverage effect of these vehicles was /still is scary….long way to go. In that context alone, official forecasting “optimism”is highly misplaced. As asset values fall, and in the absence of compensating capital, debt laibilities will continue to be increasingly distressed and “impaired”.

Michael Noonan is a ‘decent man’ on the face of it. However, in the absence of any other real expertise, I always considered his real talent as that of the horse trader variety. Able to negotiate a deal. Sadly, negotiation seems either an impossibility or a lost art (through loss of confidence, etc) in the current environment. Ditto with some of the other better Irish politicians (of the non-‘stroke’ variety I should stress). Fundamentally, what’s left is an absence of real political purpose and ability to achieve anything concrete. In the vacuum, “spin” (AKA BS) is the political language of the day. As a generally uneducated, self-interested end in itself, Official Ireland’s ‘response’ is naturally of the dumbed down variety. Unintelligent and incoherent. So, perhaps we shouldn’t be surprised by all that. The result of course is a social lack of confidence in politics and leadership, and in our economic “experts”….. and those Official Ireland politicians, ‘leaders’ and ‘experts’ are unconfortable with the lack of positive social affirmation that they previously were used to and expected. The result is that they prefer to stay “in the cracks”, keeping the head down, pursuing self interest. No one is breaking from that mould as of yet. Disheartening, but understandable. However, it’s the real and potential further negative consequences of such dysfunction that matter….not these people’s egos.

I have to remind myself the FCA is not a paper emanating from the Soviet politburo wagging its terrifying finger at rouble satellites. But then I realise the socialism for the banks concealed in FCA edicts are in fact a modern incarnation through the implicit support of the Compact and austerity of this old failed rouble system. I’m surprised they don’t advocate we should just switch the euro over to the old rouble system, devalue the euro by 20% and try again where USSR failed. There again there are political ramifications for this. How prescient was Orwell in foretelling these developments? You might also be surprised that the authors come out of various schools of economics that you would hope have examined through their study of macroeconomics the many instances of failure in the history of economics where the prescriptions embodied in FCA report have failed. Springing to mind are Romania under Ceaucescu or Argentina prior to its meltdown circa 2000.

But oblivious to such historical antecedents and omens the FCA unhesitatingly prescribes for Ireland its modern disguise of Wilkins Micawber economics.
You couldn’t make it up ?

But it has a good section on VAT whose popularity with the Troika as an austerity tool to drive down economic activity for business and enhance the black market has also been prescribed for Greece.


Sure – it is a poor mans tax………but that revenue stream will flow once again to corporations.
People are not asking a simple question – why corporations are sitting on huge piles of cash while goverments cannot print or own anything but debt to banks.
Equity owning goverments are bad it seems , equity owning corporations are good.
What simplistic nonsense – they think of us as debt children.

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