The international debate on the wisdom of fiscal austerity has being heating up. Since the onset of the crisis, the consensus seems to have gone through different stages: initially there was widespread support for fiscal stimulus, followed by concerns that fiscal policy needed to tighten as debt to GDP ratios rose in many countries to worrying levels, followed more recently by concern that fiscal policies may tighten too much given the persistence of the crisis-induced recessions.
A useful aspect of the recent debate is greater differentiation between countries facing serious sovereign creditworthiness challenges and those that do not. Countries facing immediate creditworthiness problems face a dilemma: fiscal tightening tends to further weaken the real economy; but allowing deficits and debt to stay on a higher path further weakens creditworthiness. The fiscal council has been grappling with this dilemma in its first two reports (see here and here).
Drawing on recent work with a number of co-authors, Giancarlo Corsetti provides a useful framework in this VOX piece for thinking about the dilemma. He makes the important point that the appropriate fiscal stance can be quite different for countries facing a large market risk premium (e.g. Ireland) and those that don’t (e.g. the UK). Countries facing a large risk premium face a dilemma in setting the fiscal stance between supporting demand and supporting creditworthiness – a trade off that is absent or at least much less pronounced in countries with low long-term bond yields. Corsetti’s framework has the additional element that increases in the sovereign risk premium can feed through to the risk premium facing the private sector though the entwining of bank and sovereign balance sheets. While he does not believe that this additional element makes fiscal contractions expansionary, it does tend to reduce fiscal multipliers. On the other hand, for countries not facing an elevated risk premium, multipliers are likely to be large for countries in deep recessions with policy interest rates constrained by the zero lower bound, suggesting the appropriateness of a more stimulative fiscal stance.
[S]ystematic anticyclical public spending is arguably desirable when policy credibility is not an issue. In the presence of a volatile market for government bonds, however, anticipation of anticyclical fiscal policy may not be helpful in ensuring macroeconomic stability. A prospective increase in spending in a recession may feed confidence crises by amplifying the anticipated deterioration of the budget associated with output contractions.
This possibility poses a dilemma for highly indebted countries. In light of the above considerations, countries with a large amount of debt may be well advised to tighten fiscal policies early, even if the beneficial effect of such action – prevention of a damaging crisis of confidence – will naturally be unobservable. From a probabilistic perspective, even a relatively unlikely negative outcome may be worth buying insurance against if its consequences are sufficiently momentous. In the current crisis, unfortunately, we know that such insurance does not come cheap.
As I noted in an earlier post, the recent paper by Brad DeLong and Larry Summers provides an important challenge to those who see a case for a more rapid fiscal adjustment. DeLong and Summers emphasise that current fiscal policies that slow the economy in the present can cast a long fiscal shadow through “hysteresis effects”. (Hysteresis effects here refer to effects of current output and employment levels on future output and employment through the inherited capital stock, inherited skills, inherited business/employment networks, etc.) In their model, it is possible for larger current fiscal contraction to worsen creditworthiness even if it leads to higher current deficit and debt ratios. As noted in the earlier post, DeLong and Summers recognise that the effects might be quite different for countries that already face a large default premium. Interestingly, however, this possibility is played down by Brad DeLong in his recent VOX column. Simon Wren-Lewis – who has provided a sustained argument for more relaxed fiscal stances in countries that are not facing market stress – provides a useful analysis of why the trade off would be different in the two types of countries. The argument comes down to incomplete information about the political capacity/willingness to make the necessary adjustments to avoid default.
One reason why government might default is a political inability to cut spending or raise taxes enough to get the primary budget balance into surplus. Governments can demonstrate that they do have that ability by cutting the deficit rapidly now. Promises to cut it in the future carry much less weight, and so as a result have less impact on the chance of default. Even when the primary balance is in surplus, a government may decide it is in the country’s best interest to default, because any damage to its reputation will be offset by the advantages of not having to cut spending or raise taxes still further to pay the interest on its debt. Once again, a government can demonstrate that it is not minded to do this by reducing its debt as quickly as possible.
In either case, default is less likely if debt follows the black line (austerity) rather than the red line (stimulus) [see post]. The markets are, quite rightly, not very interested in what happens into the medium term, because by that time default risk under either policy has all but disappeared.
This incomplete information problem may be heightened for countries within a monetary union with high debt to GDP ratios. As we have seen with experiences of Italy and Spain in the latter part of 2011, countries without their own central bank to act, in extremis, as lender of last resort to the government are susceptible to falling into a “bad expectations” equilibrium, whereby the perception of default risk (however formed) leads to high interest rates which leads to actual default risk.
The more differentiated treatments of the fiscal challenges facing different countries is a welcome development.
107 replies on “Fiscal Dilemmas”
I think the Great Island power station thingy really captures the essence of the modern European market state.
The inherited capital stock, inherited skills, inherited business/employment networks, etc etc………..gone.
The state loses this site to a multinational , the local skills are lost , the construction workers are bused in……….. the social network is lost.
And for what ?……….. profit ? what net wealth was generated in this project.
A surplus was transfered but no wealth was created and thus no extra wage demand when credit fluff is subtracted.
If a national economy pays its electricity or construction workers too much it can devalue but what can a captured market state do in such a situation ?
We can always print Euros I guess.
Would you advocate printing Euros or Punts ?
‘The more differentiated treatments of the fiscal challenges facing different countries is a welcome development.’
The philosophy of science accepted this over 50 years ago. Looks like the Irish Gov and neo-positivist social scientists’ addication to universals (regressive and oft nonsensical resp.) might, hopefully, be subject to some realistic, if particularistic and contextual, challenges.
Progress John, progress.
A country (withen the eurozone) might default for more then political reasons.
The most important is the extreme advantages of a positive money supply…….in a devaluation scenario this seeks out the least wasteful activities while avoiding a deflationary slump – in such a slump it is impossible to seek efficiencies simply because there is less and less activity to measure any gains against.
I save money but destroy capital calories (depreciation) by simply going into a economic hibernation to save a stock of metaphysical money.
Consider these passenger numbers from the Belfast to Derry railway line
Y2007 /8 : 1,175,000
Y2008 /9 : 1,402,000
Y2009 /10 : 1,311,000
Y2010 /11 : 1,477,000
Note : In 2009/10 the line was closed between Ballymena and Coleraine for major infrastructure work. (30 March 2009 – 28 June 2009)
Passenger numbers for the Enterprise train service from Belfast to Dublin for each of the last five years are as follows:
Y2008/ 9 : 834,000
Y2009/10 : 706,000
Y2010 /11 : 747,000
Keep in mind these are between two large population centres although Belfast is not large enough at least from Colm Mcs perspective.
Also I think the Enterprise route is much faster.
Therefore it is logical to conclude that the Enterprise route should have experienced even higher growth then the Derry route.
But it has experinced a decline.
Why is this I wonder ?
This is simply good substitution in action.
Trains have higher Labour inputs but lower fuel inputs then private cars……its that simple in many ways.
The UK provided more tokens (albeit devalued from a external perspective) in peoples pockets via their monetory policey……if I have no tokens I cannot get into neither a Train or a car , I walk to Belfast & back again hopefully with a full stomach.
(keeping my Cork accent to myself)
Since this time total N.I.R. passenger rail miles have increased 8% in the last quarter of 2011 relative to the 2010 quarter.
We must be wary that I.R. does not dispose of its Spanish Alstom 2700s at this time (albeit more unreliable then its Japanese units).
These are only half way through their lives and at the very least would be useful for now closed lines such as the Waterford Rosslare route , stripping some units to keep others going.
When we go back to the Punt we will need every available Irish Gauge Loco & DMU ,no matter how old.
“In particular, the
simultaneous pursuit of fiscal austerity, structural reforms, and the deleveraging of the
economy—objectives that can work at cross purposes—increases the risk that the program’s
objective of rapidly reducing macroeconomic imbalances remains out of reach in the near term.”
The above is from the IMF report on Portugal.
It seems they recognize the potential pitfalls of the course which it appears applies equally to Ireland.
It seems the Troika medicine does not differentiate in any of the programme countries despite the misgivings of the IMF.
Ireland is caught between a rock and a hard place. This paper addresses one of many dilemmas. The most critical one, however, cannot be side stepped.
Should Ireland stay in the Euro Zone?
The Euro zone is the modern equivalent of the worn-out Gold Standard. Are the benefits of staying in the current Euro-zone standard worth the costs? It looks increasingly doubtful.
a benefit of the increasing discourse on the ‘Fiscal’, and beyond the remit of IFAC on de numbers, might move to the type of particular society/economy that we might wish to create. What, where, and who on Gov Expenditure and the real ‘HOW’ of taxation and the contrarian and contested dynamic between them. This state has never really had such a debate IMHO.
Ireland is distinct from other developed western EU economies in having a middle class welfare state and a distinct bias towards the landed/propertied/professional, as reflected in the political system, and an unmistakeably highly skewed outlier bias towards capital.
Time to revisit the capital-labour relation: Step 1 – educate ALL labour and address the regressive nature of the present system; which I believe is recognised by Minister Quinn.
Cannot say the same at the mo for Minister Bruton:
The one advantage of the euro was/is the ability to import capital stock cheaply.
The one problem is that we imported the wrong capital stock.
Y2008 dec 31 : Age of cars 4 years or over : 66%
Age of cars 6 years or over : 51%
commercial vehicles 4Y or over : 58%
commercial vehicles 6Y or over : 42%
Y2010 dec 31 : Age of cars 4 years or over : 75%
Age of cars 6 years or over : 56%
Commercial veh. 4Y or over : 73.4%
Commercial veh 6Y or over : 50.5%
God knows what it was on dec31 2011.
The costs of our extreme car based transport policey have manifested themselves now.
A typical heavily used Taxi is buggered after 5 or 6 years
You may get a bus to 10 years ?
A Train or tram (although not a Spanish Alstrom unit) can have a full and eventful life into its 30s if well cared for.
Our stock of Transport capital is depreciating rapidly because of its extreme road based nature.
The true costs of our car /road culture is manifestly unsustainable at least under this present oil price envoirment.
Our goods imports are getting swapped with oil money exports (Oil imports were 3 times higher then vehicle imports during 2011) – we have little choice but to eject & devalue given our poor investments when we were fiscally the best boys in the class which = the importation of high quality BMW credit grot.
Its a choice of getting on those rails or experiencing a nasty monetary entropy debt where all those high value Euros go to pay for oil & external interest.
The Euro and its poisoned monetory institute ideology is at the heart of this gross & spectacular misallocation of resourses.
There’s an old City joke that an economist is someone who will tell you tomorrow why what he said yesterday would happen today, didn’t.
This really comes across a academic economists engaging in a less timely version of the financial analysts game of coming up with explanations for what the market has already done.
That said, yes, welcome if overdue.
At some point academics will focus on the long-term economic and social consequences of the gold rush to be last in the adjustment queue by the powerful and well connected at the cost of the rest. That point likely being years after the event, obviously.
I hear the term austerity, but don’t see any. Money is being spent. For example Italy is purchasing the F-35 jet fighter, which as far as I can see is the most expensive one. Bonds (often worthless) are being purchased hand over fist by central banks. More than a few European nations are involved in foreign military adventures. So I am beginning to wonder if there really is any austerity. Maybe it is spending priorities not spending that is the problem. Monetary stimulation seems to be actually injuring poor people by increasing inflation, while not increasing salaries.
There are doubts about the F-35 program due to austerity programs. The first salvo was fired by the US Congress when it indicated that the total number of planes purchased would be reduced. Canada was caught in the after draft because this means the per plane cost would increase. Big political scandal about when the Canadian gov’t knew the price had increased, procurement is no longer certain.
Foreign adventures by the west in the past two decades have not been profitable.
Good job Ireland doesn’t buy fighter jets or we’d really be in the doodoo.
“The more differentiated treatments of the fiscal challenges facing different countries is a welcome development. ”
Now what would be the economic Model-in-Use be then? Permagrowth? Permagrowth exhibits a geometric trend line. Sorta goes a tad vertical after a while. That’s fine in a virtual world, but not in an economic system which operates in a real, physical environment, with real physical inputs, and has physical outputs – bar one: debt. Debt also exhibits a geometric trend-line. Being virtual, it will grow without restraint. Outcome? Like we have now. Its a pity income – especially our somewhat uncertain future income – is tethered to our physical economy. Makes both current and future debt (in some measure) unpayable.
Its yer dopey economic model lads. That is what needs attending to. Kinda reminds me of our legislators: their policies become their evidence.
Let me preface this comment with a declaration that there is no intent to impugn the integrity or honesty of the principal contributors here. And I recognise that most have knowledge and competence primarily in the macroeconomic areas of fiscal and monetary policy and are understandably reluctant to pronounce on areas outside these specialisms. I also recognise that academic resources in Ireland available to address the broad gamut of economic policy issues are limited – for all sorts of reasons.
However, I would still contend that this focus on fiscal policy is providing unnecessary and excessive support for the Government’s ‘one club’ approach to fiscal adjustment and economic recovery which, almost by definition – and despite its potential, eventually, to re-establish some measure of creditworthiness in the international sovereign bond market, is counter-productive and self-defeating in the context of increased efficient economic activity and employment-generation.
One only need to look at the CSO’s detailed CPI sub-indices since the double bubble burst. The non-sheltered sectors have experienced and participated in a massive ‘internal devaluation’ – probably far greater than in any other Euro Area economy. But the sheltered sectors have barely budged. And this refusal to budge has created a ‘double whammy’ for the non-sheltered sectors. Not only have they had to cope with their own massive internal devaluation, but they’ve had to cope with the failure of the sheltered sectors – on whom they rely for many services – to budge.
And yes of course the unavoidable deleveraging by the banks has shrunk the availability of credit but the non-sheltered sectors – which have to be the engine for employment generation – are suffering this ‘double whammy’ and are unable to make a plausible business case to apply for credit. As one business person commenting on this site many moons ago put it (paraphrased) “I could do with some credit from the banks, but I don’t expect them to advance it. Hell, if I were a bank I wouldn’t advance credit to me.” He or she simply couldn’t make a credible business case given the uncertainty of demand and revenue flows and the squeeze on free cash flows to service debt that was being exacerbated by excessive costs imposed by the sheltered sectors.
The really galling thing is that the opposition to any sort of meaningful internal devaluation in the sheltered sectors is not the preservation of pay levels related to the marginal value of output; it is the determined preservation of anti-competitive practices, of monopoly profits, of costly structural and financing ineffiencies and of widespread rent-seeking.
And yes of course any changes in these areas are difficult to make and are ‘slow-burn’, but they should have been initiated in a meaningful manner when the Troika arrived. Some might be beginning to bear fruit now. But instead the Government has managed to whittle down to almost nothing the very limited structural refrom programme the Troika set out.
There’s little point going in to the detail of what could and should be done – and there is so much, but, apparently, nobody wants to know. The Government is set on its course. It is clear that facts, evidence and analysis will not enourage it to change course. But there are problems festering that may very well blind-side them and then we’ll get the usual panic response. As Macmillan once put it so well: “Events, dear boy. Events.”
“The more differentiated treatments of the fiscal challenges facing different countries is a welcome development.”
How can you square this with your support of the Fiscal Compact Treaty?
It is obvious that Germany, the Netherlands and other core countries need to expand now so that the peripheral countries that need to impose austerity have any hope of success. Martin Wolf, Paul Krugman and others have been writing about this for months, if not years.
It is easy for the Germans to lecture everyone about austerity now, but when the were imposing austerity in the 90s and 2000s, the world was going through an extraordinary period of global growth.
Part of the solution to the current crisis has to involve a closure of the current account imbalances in the Eurozone and that means the onus is on Germany to reduce its surplus via economic expansion.
Of course, the Fiscal Compact makes no distinction between the different challenges within the Eurozone. In a crisis everyone needs to impose simulataneous and self-defeating austerity.
@ Paul Hunt
“The Government is set on its course. It is clear that facts, evidence and analysis will not enourage it to change course”.
Agreed. That sums it up really. It is not an information problem. It is an ideological one.
Great to have you back. I worried I had unintentionally contributed to your exit. You say there is little point in going into the detail of what could and should be done in terms of specific product market reforms. I disagree. I think you might be surprised by the traction you would get.
But Paul is right. Croke Park, for example, prevents any meaningful attempt at wage reform in the public sector.
So he might gain traction only to hit an unmovable road block !
The UK has an enormous budget deficit and incredibly low interest rates. Clearly the UK benefits hugely from a creditworthiness point of view, though one would have thought the inflation factor would have fed through into gilt yields.
As to Ireland, we are somewhat beyond this academic debate. Without official support Ireland would have zero creditworthiness. As to the political will to really, really correct the problem I don’t think it is there. The debt burden in excess of 60% GDP will be around 50,000 per household and we are finding it impossible to collect the first 100 quid.
The decision we face on the fiscal compact is whether we will be part of it or not. It is not whether the compact itself goes ahead or not — we don’t have a veto. (Also, given the revised six pack and policy preferences in the countries you mention, I would not exaggerate the additional constraining influence of the compact on their fiscal policies.)
The FT has a good editorial on the need a better growth agenda in the context of a more differentiated response.
You might be right. But still there is likely to be a better return to effort with a focus on the substance.
Thank you, but it’s only a ‘flying visit’. I’m aware that the case I advance has secured some (very limited) traction. It’s not just the supportive comments I occasionally attract here; I also receive private communications from people embedded in the ‘system’, but who are unable or unwilling to speak out publicly.
The libel laws also have a chilling effect – particularly in relation to the private sheltered sectors. And it would be unfair to focus excessively on the semi-state and public sheltered sectors. The problems are evident across all the sheltered sectors. But I have been compelled to focus on the semi-states and public sector – and have been criticised for doing so – because they are genuinely in the ‘public domain’ and of the need to escape the attention of ‘m’learned friends’.
I had vainly hoped, once the Troika has set out its (quite limited) programme for structural reform and the new government was in place just over a year ago, that some serious progress would be made. I had alos hoped that FG and Labour might have engaged in some reciprocal slaughtering of their respective ‘scared cows’ – those in the private sheltered sectors on the FG side and in the semi-state and public sheltered sectors on the Labour side. But any efforts in these areas have been illusionary and total for the political ‘optics’.
A government that exercises such excessive executive dominance and has no effective mediating agencies between it and the citizens – such as a properly functioning parliament, an effective system of local governance, an effective statutory body advocating and representing the collective interests of consumers and a genuinely independent and accountable system of economic regulation – can only do one thing at the time. It will purport to do many things, but these are generally displacement or distracting activities.
In this instance, the primary – almost sole – focus is on the salami-slicing of public expenditure and incremental tax increases. And, in this context, the last thing it wants is the kind of opposition and disruption that meaningful structural reforms in the sheltered sectors could – and lamost certainly would – provoke. The Government has made much on the international scene of its ability to puruse its programme of fiscal adjustment without provoking the popular unrest that has been evident in other programme and non-programme countries. It’s focus on fiscal adjustment – in addition to the internal dynamics of the factions in government – means that it’s hands are tied. And it – and the various vested interests – are probably more than pleased that its hands have been tied.
So it’s ‘steady as she goes’ as the domestic economy sinks further in to the mire. I haven’t given up, but I recognise that advancing reasoned analysis will not change the Government’s course. Once they det thier course, governments are impervious to reason. All eyes are focused intently on doing those things that will secure – and on avoiding those things that might prevent – re-election. That’s really all there is.
I’m just going to wait until a few ticking time-bombs that are embedded in corners of the system go off. They might or might not go off. I don’t have a crystal ball. But if or when they do some of the log-jam will be freed up.
The decision we face on the fiscal compact is whether we will be part of it or not. It is not whether the compact itself goes ahead or not — we don’t have a veto.
Respectfully, it is not quite that simple.
While Ireland can not derail the Fiscal Compact on its own there are now noises in Europe that the treaty should be acknowledged for the impossibly strict pro-cyclical farce that it is. It seems that even “prudent” Germany and Holland will have trouble meeting the requirements of the EU Peripheral Economy Suicide Treaty.
There is now the opportunity to confront the hijacking of the EU’s economic policies by a profoundly reactionary and misguided core if we show some mettle, and some solidarity with Spain, Portugal and Greece. The treaty can not survive even a few of its former reluctant and browbeaten supporters experiencing a change of heart.
This is particularly timely since everyone is now starting to acknowledge the primary problem being lack of growth and the extremely negative role that a ideologically extreme conservative German government and pro-financial sector ECB has played in the European component of the global financial crisis.
At the very least the Irish government should postpone a referendum on the treaty until the last possible moment, the soul of the EU is still in play.
So do you agree that the Treaty is flawed even in the area of policy that it (narrowly) seeks to address i.e. fiscal policy?
The point is there is a intellectual, even idealogical, battle going on for the future direction of European economic governance. We have a Germanic/Bundesbank oriented narrative that says that the cause of the crisis was purely fiscal incontinence and that the cure and prevention of future crises can be provided by fiscal restraint.
This is wrong! Any economist or politician worth his salt (including, I presume, yourself and Philip Lane) knows that simulataneous austerity will likely be self-defeating and will not on its own solve the current crisis.
Worse, the presciption of simulataneous austerity without any debt restructuring or stimulus in the core countries is going to lead to severe hardship for the millions of unemployed and under-employed in the periphery.
And your support of the treaty is only going to compound that hardship but will ensure that the moralistic, Germanic narrative of the crisis prevails.
Finally, and from a political point of view, the approval of this treaty will make genuine reform much more difficult. Why would the Germans change their tune when everyone has already agreed that their narrative is correct?
And if you think the 6 pack has any relevance, why is it that Germany is not currently in violation of current account surplus guidlines?
We may not have a veto over the treaty but there is a intellectual battle to be won or lost.
We may not have a veto over the treaty but there is a intellectual battle to be won or lost.
Very nice summary, your point on the uselessness of the six pack as regards Greman mercantilism and wage dumping is well made.
The international politics of the Fiscal Compact for Ireland are indeed dreadful and the longer term implications for EU policy making even worse, the quick fix of ESM access is the free cheese that sees us stuck in a German Christian Democrat mouse trap.
Very good stuff – please post/visit more often to bring balance and, I suspect, real world thoughts.
@Shay and Bazza (and other ‘unpersuadable’),
I know I shouldn’t. Indeed, I swore to myself I wouldn’t. I can see you’re probably unpersuadable. But can you not see that your stance – advocating that Ireland reject this ‘fiscal compact’ in its self-appointed role as the sole defender of the principles and values underpinning the EU – is identical to the hubris of successive governments during the double bubble era lecturing all and sundry on the wonders of the miracle Celtic Tiger economy?
Given the disaster it, almost singlehandedly, has inflicted upon itself, Ireland is in absolutely no position to lecture others. The priority has to be getting our own house in order. Then we might actually have a leg to stand on. But, no, it’s far easier to put all the effort in to shining a light for the heathens abroad than to tackle the serpents at home.
I know I shouldn’t bother either but…
It’s very simple really. This treaty is bad economics and bad politics. It will inflict lasting damage on our economy and the Eurozone as a whole. Many in the pro-treaty camp openly acknowledge it is badly flawed. So why should we vote for it?
The standard argument is there is no alternative (TINA) – we need ESM money no matter what and therefore must oblige. I never though the likes of Whelan and McCarthy would be in the TINA camp, but there you have it.
You now seem to be putting forward a second argument. Namely that we should just shut-up and take our 19th century medicine because of the hubris of the past. This kind of self-flagelation is truly bizarre. So what if Bertie and Charlie were idiots – so too were Chirac and Schroder when they emasulated the old Maastricht SGP; so too are Merkozy with their ridiculous stumbling from one crisis/summit to the next.
Of course there needs to be reforms at home – show me the country that doesn’t need reform. Even if we introduced the most competition friendly legislation, radically reformed our politics and slashed the deficit without inducing a depression (and I think we should do all of the above, as far as possible) we would still be left with the following in the best case scenario:
– sovereign debt to GNP of 140%
– private debt to GNP of 450%
– 400k+ unemployed
– a broken banking system
– a one-dimensional central bank (ECB) intent on raising rates at the first sign of recovery.
That is not a sustainable situation and the only way it can be changed is by forcing a rethink at the European level. The first step in doing that is rejecting this treaty.
After WW11 Irish America controlled the Democratic party.In 1948 the Democratic Party President. Harry Truman organised the Marshall Plan to rescue Germany and mainland europe from economic ruin. Irish America ‘s control of the Democratic Party reached it’s zenith in 1960 when the Irish big city bosses of the Great Eastern and Midwestern cities combined to nominate the grandson of Honey Fitz as the democratic candidate for president.
On the 26th June 1963 President John Kennedy spoke at the Berlin Wall and commited all America’s resources to the defense of West Berlin. Kennedy arrived at Dublin airport later that day and was greeted by another american born president, President De Valera. JFK spent eight hours in Germany and four days in Ireland. On the day he died ,the President of the United States,The Speaker of the House of Representatives, the Majority Leader of the United States Senate and the Chairman of the National Committee were all Irish, all Catholics and all Democrats.
The Irish in America rescued Europe after WW11. Perhaps Germany and the rest should be reminded of this important fact.
@ Paul Hunt
The extremists who rebelled against the new nation did not have a radical agenda as an alternative, beyond hatred of the British. The settlement in NI, more than seven decades later, was called ‘Sunningdale for slow learners’ by Seamus Mallon MP, a brave democrat, in reference to the opposition of the extremists on both sides of the sectarian divide, to the first power-sharing agreement.
Today, the sense of victimhood is fed by a one-sided story of grievance and seldom with credible solutions.
Fintan O’Toole attacks ‘right wing orthodoxy’ in The Irish Times today as if for example there had been no left-of -centre rule in France, Spain or Germany in recent times.
We both know from even the small sample of contributors on this blog that the majority yawn when it comes to solutions within our own control.
Even on the issue of Europe, there is no chance of having a real debate because there must first be a recognition that the country is broke and dependent on foreign support.
Leaving the euro and abandoning austerity is one alternative but where are the advocates who consider the obvious downsides? We seldom hear of downsides.
It’s easy to think devaluation would be a miracle in a country where American companies are responsible for most of the exports.
@ John Corcoran
The vile self-styled Tailgunner Joe doesn’t fit your narrative?
@ John Corcoran
Good stuff and it might explain why Ireland has been treated oh so well by Europe in recent times.
How many tens of billions were pumped into us in EEC structural funds? The support for our banking system from the ECB amounts to the size of our GDP, surely there never has been such a huge lender of last resort salvation. And then we have the bail-out iself, without which it is really hard to imagine the social and economic chaos which would now face this country.
I know the delusional little Irelanders believe that this enormous support was provided in self interest (to protect the Euro etc.). Ireland is 1% of the EZ project, people who argue this should get a life.
@ Michael Hennigan
I think the people who sit on the right side of the aisle, as BEB so aptly puts it, should show the same sort of solidarity as the naysayers are wont to do.
Where to start?
The first thing to say is that all it takes me to persuade me is evidence, so as soon as you have any feel free to share. I am sure that Richard Koo, Paul Krugman, Prof Stiglitz and a host of economists outside the cult of the Eurozone would be fascinated to hear your tightly argued, fact laden defence of the Fiscal Compact, the German method and expansionary austerity.
I will not be holding my breath though, as I recall the most substantive thing you had to say on the Fiscal Compact was that it was “a renewal of marriage vows” or some such pablum. Even DOCM has given up trying to find actual economic merit in the Fiscal Compact. It is a nakedly right wing, absurdly pro-cyclical, political instrument and the very best, the very best, that can be said about enacting it is that if Sarkozy is reelected there might be enough would be Thatchers in power in Europe to consider making an example of Ireland for our lack of abasement to the new European reality.
Now for the bit which I find particularly vexing.
Really? The stance of those who oppose the Fiscal Compact is identical to those who supported the whole Boston or Berlin shtick and Ireland’s experiment with unregulated ultra-capitalism? Did you you just write that? Wow.
A notable thing about the Fiscal Compact (and its biggest political liability) is that it is supported wholeheartedly by exactly the same set of right wing blow hards and market fundamentalists who previously helped inflate the property bubble and elevate the financial sector into Europe’s fourth pillar of government. How you can say otherwise is genuinely bewildering.
Like many on the left I saw the crisis coming but we were too passive and ignored by a country in the grip of a centre right fugue and a Europe coopted by a neoliberal cabal. That is why I am here now, I may not be able to stop the further eroding of democracy in Ireland and social democracy in Europe but I will be damned if I go quietly.
The ugly truth is that much of the support for the Fiscal Compact comes from small state, market liberal ideologues who see in the treaty a way to permanently embed those ideologies in law. They have taken advantage of a crisis they precipitated to stage a coup.
Lets not pretend otherwise, shall we?
back from visiting well governed countries in middle Europe. While you were away we had the final report of the Mahon tribunal. As a result a senior pol who could not explain the source of a six figure sum is now branded a disgrace. I note that there is a similar pol in Middle Europe who also cannot explain the origin of a six figure sum. However, he is a current office holder. Is there hope for Bertie yet?
I fundamentally disagee with your thesis on two points, I seriously doubt governance is any worse here than anyhere else-a relative concept. Moreover, I seriously doubt that internal reforms will have the meaningful impact you forecast.
Our situation is unsustainable. No amount of “reform” is going to change that, welcome and all as such reform would be.
I am not a little Irelander, a nationalist or a leftist. But I have lived for many years in German speaking countries. I know the Germanic mentality and I know that those countries are very flawed in their own right. Germany today would not exist without the kindness of others and the likes of Finland would be an economic basket case now if it did not have its own currency in the 1990s.
So while you guys might see this treaty and crisis as a stick to beat the trade unions and other vested interests with, the reality is that unless we get off the German path that all countries are being dragged down, the periphery is Europe is soon going to make southern Italy look like a sustainable economic region.
Seeing as you were so patronising in your last post addressed to Shay and I, would it be too much to ask that you address the points in my reply?
It might be wrong but we don’t have a choice. You can stand and fight the socialist cause as a tiny island of no power or you can sit and wait for the others.
I think if we vote no that we are destined to fail.
Maybe we should vote yes and work on building up a pan-European popular movement first. Greed unites quickly and well. It’s hard work uniting against it
The settlement in NI, more than seven decades later, was called ‘Sunningdale for slow learners’ by Seamus Mallon MP, a brave democrat, in reference to the opposition of the extremists on both sides of the sectarian divide, to the first power-sharing agreement.
For those left confused by Michael Hennigan (and surely it can not be his intent?) the original Sunningdale agreement was brought down not by “extremists on both sides” but by the Ulster Workers Council strike, a very well organized mass act of civil disobedience orchestrated by the right of the Unionist political spectrum (partially led by the unlamented emigre David Trimble) and these were the vast majority of the slow learners he was referring to.
In relation to fiscal dilemmas , which has the more serious negative effect on economic activity, fiscal tightening as per the fiscal compact or bank deleveraging?
What damage will be casued by an ECB deleveraging policy of returning to the ‘nirvana’ of the status quo ante which will not happen for decades, if ever?
Paul, isn’t it the case that the option value of the possibility of real Keynesian policies when they might really be needed in a post reform economy, longer term is being sold cheaply to ‘copper-fasten’ ESM access thus allowing ‘fau-Keynesianism’ to continue to allow your reform targets to fend off said reform.
There is no interest in government in real no-low-hanging-fruit because the bond market his for the time being lost interest in the Irish economy. The external prompting of the FC and external creditors will be far more leisurely and more ‘just keep a lid on it’ based philosophy than a possible requirement at some point in the not entirely distant future, to fund the country without official sector shelter – understood by the populous who just might swing cats and bruise sacred cows.
I think you are Pigeon-Holing.
@Brian Woods II
They pumped in fiscal funds but got a interest return on this , that was the deal
If you look a EU fiscal fund flows it was mainly directed towards Roads & FG Farmers.
It was not directed as making us a more sustainable organic economy….. we were merely a conduit for funds,not their terminus – their goal had nothing got to do with us really
The core got cheap oil from the desert , were unwilling to pay their workers much and thus exported this now excess oil/ credit to the periphery so that they could earn a interest / mercantile income from this transaction.
It got crazy near the end so as to somehow sustain this stock of metaphysical capital……… with poorly made French trains made in Spain and all that.
But the wheel slowly turns.
When France goes its own way and breaks from Germany all hell will break lose as there is long term smart money in that country with therefore a lot to lose if this neo liberal shit really is the endgame.
Major, major diversion. Those interested in Fiscal Treaty should turn left immediately.
I lived through the dark nights of the Loyalist strike in Catholic West Belfast, though let me assert that the power cuts were evenly applied.
But make no mistake. The current dispensation in NI is indistinguishable from Sunningdale (I think there may be a bit more deference to the Irish Language, otherwise absolutely the same).
The IRA in 1973 had no electoral base. They despised the Sunningdale settlement and greatly accelerated their terrorist campaign to the point were there was a Prpotestant backlash which said “enough is enough”.
25 more years of IRA inspired mayhem until the IRA find that they now have electoral support and Sunningdale wouldn’t be so bad after all, the rest is history.
What caused the IRA to get electoral support in the meantime? The hunger strike of 1980. So there you have it. Margaret Thatcher was the true originator of the Peace Process.
@Brian Woods II
I lived through the dark nights of the Loyalist strike in Catholic West Belfast, though let me assert that the power cuts were evenly applied…Margaret Thatcher was the true originator of the Peace Process.
I buy that almost completely Mr Woods.
Let’s hope that tempers remain calm in the north, an increase in manufacturing would go a long way to making sectarian matters seem less important.
@Shay and Bazza,
Just a few observations before I clear off out of here to return to observe those problems that are festering nicely under the radar and should shake-up the arrogant, the complacent and the willfully deluded when they erupt.
So far as I can see, John McHale’s initial post deals with the trade-off between the inevitable damage done by the extent and pace of fiscal adjustment and the benefits potentially generated in terms of creditworthiness in the international sovereign bond market. My principal contention – for longer than I can remember – is that fiscal adjustment without meaningful, counter-acting, structural reform is counter-productive and self-defeating. But the Government has set its face detereminedly against any sort of meaningful structural reform – and that, more or less is that, until events compel it to change course. So there is nothing I, or anyone else, can do, except wait for these events to arise.
But you persist in focusing on this need to reject the ‘fiscal compact’ so as to ‘save the soul of Europe’. (I was comparing the hubris of this stance with the hubris of previous governments.) The ‘debate’ – if it could be dignified in this manner – between the ‘yes’ – and the ‘we don’t like it, but we have to vote ‘yes” – camp and the ‘no’ (because we hate everything to do with the EU or we want to give the Government a kicking or both) and the ‘no’ (because we want to save the Ireland and the EU from this evil centre-right hegemony) camp is totally surreal.
Both sides indulge in the ‘dialogue of the deaf’, but neither side is prepared to recognise or tackle the things Ireland can and should do to help itself. The ability to attempt to suspend disbelief indefinitely – by both sides each in its own inimitable fashion – is remarkable – and quintessentially Irish. It would be hilarious if it weren’t so sad and stupid. Hope all enjoy it while you can.
This is not about the cause of socialism in the face of market based liberalism. If all you pro-treaty guys like to think that it is only in the interests of a trade unionist or a looney-lefty to vote against this treaty then you are kidding yourselves.
Your points about reform constitute a straw man. I am all for reform and also think it is necessary. But that”s beside the point and, to reuse the tired old simile, the reforms you speak of are akin to rearranging the deckchairs on the Titantic.
Furthermore, it is not about saving “Ireland and the EU from this evil centre-right hegemony” it is about saying No to a misguided and outdated political-economic narrative.
Insisting that the onus should be on Germany to reduce its trade surplus and arguing that the ECB should be remodelled on the Fed or the Bank of England is hardly the 21st century version of the communist manifesto. But these things need to be stated loud and clear and repeatedly by our economists and our politicians. Both have so far failed in this regard, which is why a No vote is necessary.
You write well about the “dialogue of the deaf” and there are many on the left who are voting No to this treaty for all the wrong reasons. But the pro-treaty camp are also deaf to the political and economic consequences of the current policy paradigm.
@ John McHale, et al
Thanks for posting and cracking discussion above.
On the main issue.
From the government POV, I would keep it simple and do exactly what is said in the MoU, no more no less. Going around promising more actually raises the spectre of less being delivered (see the Household Tax farce), and puts you danger of creating a self-fulfilling prophecy. This is what George Osborne is busy doing and it is not a route I would suggest following. There is no need to create a self fulfilling prophecy. Creditworthiness will come when the economy is growing, employment is rising, etc.
My envelope says the state won’t quite make it in time for the end of the first bailout, but it wouldn’t take a lot for it to do so.
I have some sympathy with the Government going about the world saying all is well and suffering from derision at home as a consequence. What are they supposed to say? But however they put their best foot forward, it would be as well if that message had some actual meat in it, rather then being riddled with wishful thinking.
Having said that, I hope that in working closely with our partners the Government is far more clear that the flat-lining growth in Ireland (and shrinking GNP), is a consequence of the policies of the Troika, and that the Troika’s own predictions as to what would happen as a consequence as to their enaction are wrong – as with in Greece and Portugal.
This leads to Summers and Bryan G’s language of conditionality being the way forward.
This is also why I’m interested in the IFAC being properly resourced or a new OBR type body to come into being (with the provisos noted by Shay Begorragh), as at the moment Ireland is far too open to the Troika merely responding – hey but your guys at the DoF, Central Bank, ESRI thought exactly the same thing.
As you said it seems odd that Karl Whelan and Colm McCarthy still grudgingly seem to support the treaty. The political implications for Ireland (hell, possibly the entire EU) seem so obviously negative that the lack of any economic benefit seems almost of secondary concern.
I had thought that the lesson learned from the banking guarantee renewal was that when you recognize you have made a mistake rectifying it is more important than some idea of retaining the “credibility” that your initially wrong decision had.
Yet here establishment Ireland is, doing it again. The bank guarantee renewal, NAMA and the the Fiscal Compact. Three for three.
@ John McHale
The argument certainly can be made about a pan-European growth agenda but it’s unlikely to get support in the countries that would have to pay for it without evidence of some success in reform measures in the failed economies.
As for Ireland, your council will end up as an ornament making an intermittent interjection in the public discourse without having any impact, unless it’s prepared to sail against the wind.
The ESRI does useful research in the social and economics area but because it’s reluctant to directly challenge the conservative policy-making system, it has little impact.
You shouldn’t aspire to be in the same boat but that is the road that you may choose.
In 2008, the government of the day should have declared force majeure on many of its payment commitments but here we are 4 years later, living beyond our means; the government of the day pleading for pay cuts and expecting a rocket to be powered by a global recovery.
In the peak bubble years, only 5,000 net jobs were added in the internationally tradeable goods and services sectors in the period 2001-2007.
In the peak year of 2006, 86,000 new jobs were added: 3,000 in the indigenous sector and 3,000 in the MNC sector.
This is a striking statistic because the typical exporting indigenous firm sells about 65% of its output domestically. But during a crazy boom and rising incomes and population, they added few jobs.
There is going to be no recovery this decade that will power growth like a rocket.
Many want to preserve the status quo by blaming Europe, as if some tooth fairy can maintain bubble time incomes.
It would have been great if the banks had been left go bust but wondering about funding new banks complicates the convenient narrative.
@ Shay Begorrah
You present yourself as a supporter of the left — that can mean a lot of things and Hitler and Stalin showed that the extremes — fascism and communism — had a lot in common.
Were not the Irish trade unions part of the Celtic Tiger Promised Land?; the head of the ICTU was a board member of the Central Bank for 15 years. Most of their demands were met and now they have absolutely nothing to say about serious reform and ending the control of vested interests in the society.
There is no just society and you may want every job State guaranteed like in the old Soviet Union but I guess some who have the insider benefits of guaranteed employment, a special pension scheme etc, would not support that because everyone could not have ESB style benefits or could they?
Maybe I have mistaken the year when PIRA increased its bombing campaign of town centres? Anyway, that was that!
Germany’s biggest surplus is with countries like China — Europe doesn’t need that business!! — the latest data shows trade with the Eurozone is almost in balance.
We can piss-off almost every other member of the EMU because everyone loves the Irish!
This is fantasy stuff that a small bankrupt country could win influence by making enemies and forcing a dual mandate on the ECB.
Anyway, that’s a bullshit reason for going out on a limb.
Lets’s be independent: tell them all go to hell including the American companies who are responsible for most of our exports.
Or do we need foreign support? Chairman Hu? Mr. Putin?
@Grumpy and Tull,
I was at the door pulling on my coat, but you deserve a response.
Grumpy, I take your point about the bond market losing interest. I suspect the ‘credit’ players have taken their positions, are making thier money and waiting to cash out when the time is right; and the ‘rate’ players have probably factored in a second bail-out so see no need to exert any real pressure. It’s difficult to avoid pigeon-holing in a short blog comment, but I’m not sure in what respect I’m transgressing. Apart from the beneficial impact of possible near term ‘events’ in the longer term, as a democrat, I put my faith in the good sense of the majority of Irish citizens that will lead them eventually to assert that enough is enough and to demand change – and in the emergence of politicians sufficiently in tune with the public mood to give their demands some substance.
Tull, I agree that governance dysfunction is relative. To paraphrase Tolstoy ‘all well-governed polities are alike; all badly governed polities are badly governed in their own ways’. Ireland is at the extreme end of the spectrum in terms of government dominance, parliamentary weakness, the ineffectiveness of local government and consumer representation and the extent of capture and lack of accountability of economic regulation. Quite a lot to be done to be as dysfunctionally governed as many of our EU peers.
And whatever about your doubts about the benefits of wide-ranging and deep-seated structural reforms, the release of some of the billions tied up unproductively and inefficiently in the semi-states would be a ‘game-changer’ in the fiscal adjustment, fiscal stimulus, bond market perception and cost-of-service-reducing stakes. And I don’t mean the current half-arsed programme of privatisation being advanced by the Government.
But all of this doesn’t matter. It won’t happen in the near-term. But, eventually, this government – or, more likely, the next one – will be forced to bite the bullet. There is a choice between doing it the easy way or the hard way, but it’s a bit like Tina Turner performing ‘Proud Mary’ – “we don’t like to do things nice and easy; we like to do things nice and rough”.
Let’s call it what it is. It’s a struggle between two ideologies. There’s no shame in it.
I believe everybody should be given a good chance of a good life (not a guarantee). I believe in free education to second level and free healthcare. I don’t believe in the kind of dole system we have here – people who have worked should be treated better than those who have never worked, and people should not be punished for part time work while on the dole.
I’m a little left of centre but not much.
I am opposed to paying tithes to a financial elite imposed on us through Europe. But this is not the battle to fight them in. They are ready for us and will overwhelm us. Better to sit tight methinks
You are factually incorrect concerning imbalances. See the following from the FT:
As some of the commentary states:
“the starting thresholds for what are considered imbalances appear to be arbitrary and, in some cases, skewed to favour surplus countries over deficit ones. Thus, a current account surplus of 5.9% of GDP (e.g. Germany) is considered okay, whereas a current account deficit of 5% of GDP (e.g. Poland) is considered an excessive imbalance.”
Are you seriously suggesting that the bulk of the German surplus is with China and the EZ is in balance?
The point is that core EZ countries need to tolerate moderate inflation for a few years, say 4-5%, in order for fiscal contraction in the periphery to be successful. Why can we campaign for a dual mandate for the ECB?
Do you think that 140% debt to GNP is sustainable in Ireland or 40% youth unemployment in Spain.
I am completely baffled by your little rant:
“We can piss-off almost every other member of the EMU because everyone loves the Irish!”
Who said anything about that?????
Why can the Irish government build alliances with Spain and Portugal and shape the policy discussion to our advantage?
If the condemnation of Ireland to years of FRUITLESS austerity, successive bailouts and eroding sovereignty followed by the eventual restructuring after we have paid our pound of flesh and Das Bild says its OK, is not a good reason “for going out on a limb” then I don’t know what is.
I really would like to see some data proving Ireland is an outlier in terms of govt dominance on a relative basis. That is quite distinct from well governed on an absolute basis which it clearly is not.
I put it to you that some of the exemplars of good goverance are just as badly governed with equal amounts of regulatory capture, sloth, inefficiency etc etc etc. In all the posts from you, there is much prose and very few numbers.
I’ve moved reluctantly into the camp which sees coexistence with an internal deflation focussed Germany in the Eurozone as an impossibility. As per Oskar Lafontaine’s analysis we are trapped in a monetary Union with Germany which only they can survive, the drop in export costs which the rest of Europe needs to compete with Germany can not happen in the context of EMU, exports from the rest of Europe have gradually been replaced by those from a hyper efficient German industrial base which has an artificially lowly valued currency. When you couple this with a German government determined to keep a lid on consumption you have a recipe for the current EU imbalances.
France’s loss of jobs under Sarkozy is but a taste of things to come.
I think it was Kevin O’Donoghue who jokingly mentioned Germany leaving the Euro (followed piecemeal by everyone else except Greece) but is that any less reasonable then the mess we have now?
you make some good points.
As FOT in the IT wrote today, before the crisis we were a model for how successful government and after the crisis we became a model for “growsterity”.
I remember around the time of the bailout Kevin O’Rourke pointing out, and Paul Krugman chiming in, that the bailout and reform medicine that was being recommended was inconsistent with the fact that we had one of the most open and liberal economies in the world.
It would seem the “billions” that could be released into the economy following reforms are a figment of Paul Hunt’s imagination.
Note that I am not against reform at all. I think serious reform should be attempted. I seriously doubt, however, that any reforms will make an unsustainable situation sustainable.
Besides, the main problem is not the deficit, over which we have some control, it is the overall debt burden, which the EC/ECB want set in stone.
And yes, many other polities have their own dysfunction in these areas, but I would still contend that Ireland has its own peculiarly damaging variety. David Cameron and 9 other PMs pushed the case for structural reforms recently:
An Taoiseach joined in. Not sure if he understood what was going on – like many Irish people, he’s probably all for it abroad, but we have no need for that sort of thing on the Island of Saints and Scholars. The Merkozy twins, both facing elections – and understandably reluctant to do what needs to be done, were the targets.
And I have provided no shortage of numbers over the years to these wonderful, farcical policy and regulatory ‘public consultations’ – all to no discernible effect , but I have been discouraged from going in to too much detail on this blog.
Having had a quick look at the paper you linked to, I agree wholeheartedly with its gist and conclusions. But such reforms will not make our debt-burden sustainable.
As I said, rearranging deck-chairs on the Titanic.
A very good point. It’s the ECB we should be focusing on. Their mandate is not fit for purpose.
Just look at what is happening out there today…. Swiss borrowed 6 month money at -0.245%, Japan borrowing 10 yr at 0.9%, UK at 2%, US 2% and Germany at 1.66%. In the case of Japan, Uk and US trillions of stimulus has not affected their creditworthiness nor has it stoked inflation.
The ECB under current rules does not have the tools to be an effective central bank. The LTRO debacle is just one example.
“It would seem the “billions” that could be released into the economy following reforms are a figment of Paul Hunt’s imagination.”
Have a look at Table 4.1 in this:
And the total is less than the end 2011 net asset value which in turn is less than the regulatory asset value.
But it doesn’t matter, because the Government has neither the guts nor the gumption. In any event, I must go now. I’ve stayed far longer than I intended – and it’s obvious I’ve achieved absolutely nothing. In fact, as so often is the case here, it’s been a negative sum game.
Not true, if facts matter.
Destatis data today on Feb 2012 goods trade, shows EA trade was almost in balance.
In respect of 2011, there was a services trade deficit of €7.8bn.
Regional goods trade surpluses:
Rest of EU €35.3bn
Third countries €103.4bn.
So the EA surplus is at 14% of the total.
The services trade deficit in 2011 was in respect of total services trade.
What is your point – semi-states have a book value of €8bn – so what? This is a fraction of the cost of unguaranteed senior IBRC bondholders that the ECB insisted that we pay off. And it is far from guaranteed that that value could be realised and hardly consistutes a “game-changer”.
Your patronising “it’s obvious I’ve achieved absolutely nothing” comment does a disservice to your argument. Next you’ll be telling us we might as well go and commit suicide.
I think on reflection you’ll view that comment as being a tad excessive. I’ve being pursuing this case for almost 9 years and things just seem to go backwards. I’m just expressing a weary resignation. I’ve encountered numerous ‘false dawns’ along the way. And the disingenuous opposition either concealed under ostentatious support for reform “in principle” or revealed by the introduction of ‘red herrings’ or unevidenced scepticism is wearying and dispiriting. The silence of those who know and understand what needs to be done is particularly dispiriting.
But that’s just the way it and I’ve learned the hard way. And I’m a very slow learner. I’ll just have to wait for ‘events’.
Yee are all victims of Stockholm syndrome – we can produce our own money………… you tax it …….then defecit go away.
You either do a Edward the III number on the oil /debt vampires or they will own your ass.
It will destroy the Burbs of course……..but they are simply unsustainable creations.
I did not mean for the comment to excessive or aggressive and I apologise as it obviously comes across as such.
I do not want to detract at all from the work you have done in this regard. But you seem to be presenting a false dichotomy: either we accept the prevailing Germanic narrative, unprecendent and odious bank bailout costs and reform of the public sector OR we vote against this treaty.
Clearly, public reform should go ahead irrespective of the treaty result. And €8bn will not make a sufficient dent in our total debt.
The stats you present do not break the balance down country by country. A quick look at Bloomberg, which gathers data from a variety of source, shows that the current account surplus between Germany on the one hand and Italy and Spain is roughly €1bn and €.9bn per month. This amounts to about 20% and 15% of the government deficit.
Obviously trade in the EZ is not balanced. The Target2 debate clearly showed that Target2 imbalances were just a reflection of current and capital account imbalances in the EU (and nowhere was it claimed that these imbalances were purely on the capital accounts).
Knock the pension deficits off the NAV and it becomes clear that billions is a stretch. Again, this is not an excuse not to run public utilities to maximise shareholder ie our value. It is not a alternative to political economy to reduce the debt/deficit.
Paul is right on the need to combat all gougers but it will not cure our ills.
I like the hysteresis effect analogy that’s at the core of the DeLong/Summers paper. What is becoming more apparent is a rise in volatility and unpredictability in the analysis of the austerity vs stimulus debate. The causes are twofold, the rise in the magnitude and long term sustainability of debt levels; the crisis endured when limits have been reached and market confidence in debt burdens is lost. Often remedies have negative multiplier effects not immediately apparent. Economies using expansionary policies using debt leverage as US did in 1980’s no longer have the same wriggle room to pursue counter cyclical policies and deficit spending to escape the negative side of downturns. Basically the global economic system is becoming more volatile and more unpredictable.
Some very interesting contributions evidently contributed with a considerable deal of personal commitment. However, it seems to me that the most interesting element in the initial contribution, and the links to which it refers, is the admission, if I may use the word, that the key decisions are ultimately societal i.e. political in nature.
In this context, some may may be under-estimating the commonsense of the the Irish electorate. The current INTO conference, by way of example is quite an education in terms of some of the arguments of those “in possession”, so to speak. They bemoan the terms and conditions of new entrants to the profession but seem blind to the fact that it is their own insistence on maintaining their existing terms and conditions which are the source of this malaise.
Nothing describes the current state of schizophrenia in Ireland better than this letter by Professor William Reville in today’s IT (and the supporting one).
Academics and pay cuts
Sir, – I write to comment on Seán Flynn’s report on the front page of The Irish Times (April 5th).
Mr Flynn reports on the response to Minister for Education Ruairí Quinn’s request of eight higher-paid university academics, including four presidents, all paid over €200,000 per annum, to take a voluntary pay cut. The relevant university presidents have now complied with this request – fair enough.
However, I note that Mr Quinn’s request specifically excluded academic medical consultants working in the universities, all (or almost all) of whom are paid well in excess of €200,000 per annum. I assume that this exclusion is made because Minister for Health James Reilly is negotiating separately with the medical people. However, as I understand it, Mr Reilly’s negotiating position is to leave medical salaries alone in return for extra hours worked for public patients. Did Mr Quinn make any similar offer to the higher-paid academics, ie no salary reduction in return for working extra hours? And, if not, why not? Or, are medical salaries sacrosanct? – Yours, etc,
Emeritus Professor of Biochemistry,
Western Gateway Building,
A chara, – So Ruairí Quinn is disappointed with the response of top academics to his pleas to take voluntary pay cuts. Should he not check with the Government’s own special advisers to see how they feel about this? Surely they hold the moral high ground on this one? – Yours, etc,
Letterkenny, Co Donegal.
The Irish “collectivity”, for want of a better word, needs to face up to the reality of insolvency and agree an objective and fair method of dealing with its consequences (other than appeals to the sense of patriotism of those “in possession”).
Until it does, our foreign creditors will continue to view our position with an increasingly jaundiced eye. To quote Hemingway again as to how he went bankrupt; “first slowly, then suddenly!”.
+ 1 No one knows where this is going.
‘It is understandable to be confused by such strong market performance in the face of major global structural issues and attendant risks. I would argue that markets have turned highly speculative specifically because of the deep structural issues confronting global policymakers. Last year, the efficacy of policy measures notably dissipated (in Europe and here with QE2), provoking only more aggressive policy interventions. The markets are now responding to the unprecedented liquidity backdrop – and the reality that global policymakers have become hostage to the markets. Risk concerns have evaporated, and ebullient traders are referring to “the sweet spot.”’
@ Paul Hunt
‘The ability to attempt to suspend disbelief indefinitely – by both sides each in its own inimitable fashion – is remarkable – and quintessentially Irish. It would be hilarious if it weren’t so sad and stupid. Hope all enjoy it while you can.’
Only an Irishman could write that. As the US General said, ‘I have seen the enemy and it is us’.
An interesting interview with the head (Sean Egan) of the minnow of rating agencies, Egan Jones, in the FAZ. (As the text is mainly dialogue, Google Translate provides a reasonably accurate picture).
For the regular denizens of this blog, one point is worth noting; there is no mention of Ireland! Current spreads show that Ireland has separated itself from the pack of also rans. Many debaters on this blog seem insistent on pushing the country back into it.
‘The Irish “collectivity”, for want of a better word, needs to face up to the reality of insolvency and agree an objective and fair method of dealing with its consequences (other than appeals to the sense of patriotism of those “in possession”).’
Repeat insolvency. Acknowldegement will be a while in coming, but we will get there one day. If the northern Troubles are any guide, there will be lots more grief before reason prevails. Such is the nature of politics it seems.
‘The extremists who rebelled against the new nation did not have a radical agenda as an alternative, beyond hatred of the British. The settlement in NI, more than seven decades later, was called ‘Sunningdale for slow learners’ by Seamus Mallon MP, a brave democrat, in reference to the opposition of the extremists on both sides of the sectarian divide, to the first power-sharing agreement.
Today, the sense of victimhood is fed by a one-sided story of grievance and seldom with credible solutions’
I submit that civil war analogies have litle traction on the problems facing this state today. The old money FG ‘possessor’ elements are every bit as responsible for the bust as the new money FF/Lab types. Even that representation is a cartoon of the complex web of individual, family and corporate loyalties which ‘controls’ Ireland. We need a new analysis.
‘Extremist’ is a handy label, which seldom stands up to scrutiny. Some parts of the status quo are extreme, but not recognised as such. All sort of things are respected, but not necessarily for respectable reasons.
@ BW 11u
Having a go at the Shinners is great fun, but not much our economic downfall is directly attributable to events in Northern Ireland. The bombs certainly didn’t deter the MNCs from’landing’.
One might well argue that the militarist intransigence displayed by a series of British governments strengthened the hand of irredentist nationalism and retarded the political evolution of the 26 County state.
As we are now, thankfully, in a Peace Process, such un-neighbourly comment is in poor taste. I will simply note that HMG has lots of good reasons to take a lively interest in the evolution of our crisis.
@ Bazza et al
The latest statistics on Germany’s exports suggest two rather obvious conclusions (i) dependence on other European countries is declining and (ii) Germany is enjoying a record, but probably declining, rise in exports to booming developing countries, notably China.
One way or the other, if one accepts (as I do in the company of Martin Wolf and others) that trade imbalances are at the heart of the crisis in the EA, a necessary re-balancing of European economies is taking place. Unfortunately, absent any political recognition of the need for some economic stimulus by countries in a position to provide it i.e. Germany, this is taking place at a lower level of economic activity, a fact reflected in the poor performance of equities.
Quite coincidentally, a piece just published by Martin Wolf.
P.S. One does not have to subscribe to the (mis)interpretation of the Target 2 balances by Professor Sinn to concede the essential accuracy of the analysis of the crisis in the euro as an old-fashioned balance of payments crisis in a different guise.
F**k the markets. They are scum. And I’m not the only one who thinks it.
The best way to F$£K the markets is to make lots of Irish or Euro (?) toilet paper and let them rub their asses with it.
Finance is merely another ideology.
@ Paul Quigley
Re NI haven’t a clue what you are saying
Thanks for the Die Welt article and I just spotted the Wolf one.
It will be interesting to see how any rebalancing plays out over the next few quarters. We have already seen a call by German unions for pay rises. Pay rises and inflation in Germany are good for the rest of the EZ and it will be interesting to see how Draghi reacts to mounting Bundesbank pressure.
“F**k the markets. They are scum. And I’m not the only one who thinks it.”
Insightful as always. Tell ya what, why dont you (ie society as a whole) grow a set and stop borrowing from them then?
A brilliant piece by Martin wolf… captures a lot what I was trying to say all day, only far more eloquently.
The ‘markets’ are not outside of society. They embody a particular set of social interests, and have a certain social function. Market players have no more b***s than any other group of people, as reguarly demonstrated by the funk that get into at the prospect of losing money.
That said, it’s probably best if we don’t try to f*** anyone.
‘At the same time, German banks surely want to lend more at home. A huge lending boom in Germany would be a big help. But suppose that did not happen’
How can it possibly happen when German banks’ balance sheets have been shattered by their derivatives exposures ? Wolf’s narrative totally exculpates Wall St.
Dork is a lot nearer the mark.
look – they might enjoy it……
Anyhow – it’s important for people to take note of the sentiment. I cannot speak for everyone but a lot of people despise the markets. A lot of rational people are beginning to believe in an elite manipulating everything and pushing for a neocon agenda.
Ireland and the Baltics are off the radar because they are playing ball for now. The minute they step out of line those markets will line em up for a good hiding.
Just catching up on the last few days and not much time now to write. Excellent thread above though.
@PQ “‘The Irish “collectivity”, for want of a better word, needs to face up to the reality of insolvency and agree an objective and fair method of dealing with its consequences (other than appeals to the sense of patriotism of those “in possession”).”
Once you accept that Ireland is insolvent, there is a basis (albeit imperfect basis) to move on. Insolvency as defined in terms of Ireland’s inability to independently pay its bills as they fall due (no John, my argument is not “that Ireland is simply insolvenct given the current level of debt”, although that is certainly part of the equation, obviously). Debt restructure then becomes a clear alternative for moving forward. That said, how to move forward with fairness is the challenge, yes.
The next thing one has to accept is that Ireland’s “current levels of public sector pay, welfare rates and tax levels (in absolute terms and relative to European norms” as per John, are unsustainable and also require adjustment. I agree. However, while DOCM and John appear to support adjustment of this aspect in advance of debt restructure (on the basis the crs will not accept anything else – I disagree), I would argue in the practical, debt service (cr interest) sense that it should happen the other way around…I therefore agree also that “there is not the political capacity to bring our incomes into line with what we can afford to pay”. However, I do not agree that Ireland is insolvent to the extent (only) that there is no such capacity at present. Ireland is technically and actually insolvent based on the proper, objective definition of insolvency. However, if Ireland hopes to benefit from a debt restructure, it cannot also expect this high level of subsidised living standard to continue. The the EU “super welfare” benefits being currently enjoyed by so many in Ireland will absolutely need downward adjustment…….This is going to happen anyway, one way or the other……It’s largely a matter of when you get there and what level of damage and (further) debt has been accumulated in the meantime.
@ PH “John McHale’s initial post deals with the trade-off between the inevitable damage done by the extent and pace of fiscal adjustment and the benefits potentially generated in terms of creditworthiness in the international sovereign bond market. My principal contention – for longer than I can remember – is that fiscal adjustment without meaningful, counter-acting, structural reform is counter-productive and self-defeating. But the Government has set its face detereminedly against any sort of meaningful structural reform – and that, more or less is that, until events compel it to change course.”
Obviously, I in principle agree with this, although as I also argued on another thread I do not agree that creditworthiness can be restored to an insolvent Ireland without debt restructure to create the viable, post adjustment base from which Ireland can relaunch itself. Constructive austerity can only be achieved based on a solvent foundation – something that is currently absent for Ireland Inc.
@ PH “So there is nothing I, or anyone else, can do, except wait for these events to arise.”
Being an optimist at heart, I would like to think that the Govt would do the right thing by the people, etc. However, optimism be damned is where I have arrived at on this…..No optimist (including John McH) has been able to give enough comfort that “all will be ok” if left to the Govt and the current austerity programme and related. Therefore, in the absence of any other platform for reasonable-term or forseeable change and recovery, I believe that the FC vote is a critical juncture – an opportunity for the Irish people to democratically say how it should go from here. If they vote yes, then the complaining re FC, troika, EU programme should stop.
@ PH “But you persist in focusing on this need to reject the ‘fiscal compact’ so as to ’save the soul of Europe’.”
I disagree. For me, this is about Ireland and the self-determination of the Irish people. If the Irish people choose to remain on EU welfare indefinitely, then so be it although I will be disappointed…..I for one would much prefer the non-welfare route.
I’m also disappointed that the welfare dependency route is being supported as policy by the Irish Govt and de facto also by supporters such as John McH. The latter no doubt will continue to argue this away on the basis that Ireland is “only insolvent to the extent that there is not the political capacity to bring our incomes into line with what we can afford to pay”…..while contradicting themselves in that “what we can afford to pay” is in itself an EU /troika inflated “illusion” (albeit an economically justifiable, short term, counter cyclical liquidity measure to keep everyone ‘comfortable” for now….but remember, not forever /not for long….).
The idea of Ireland having a veto over the fiscal compact treaty is a red herring. In this state, Irish people can veto whether they are part of the fiscal compact treaty, or not.
Very soon we will see whether M Hollande or M Sarkozy, outside of electon campaigning, is willing to accept the fiscal compact treaty, or not.
Then, in any event, we will see if financial makets beleve the fiscal compact treaty is credible. Currently, that seem the less likely outcome.
Supporters of the Treaty can threaten all manner of dire consequences if it is not adopted- just as they suggested bond yields would go above 6%, the economy would contract and unemployment an emigration would soar if public spending cuts were not adopted.
All of which came to pass when ‘austerity’ was adopted.
The debate on fiscal policy has been ‘heating up’ because the remedies adopted to date clearly don’t work. Apologists for the Troika will have to find a new tune.
I think this quote from the Telegraph says it all….
“Professor Jesus Fernandez-Villaverde from Pennsylvania University said the fiscal austerity imposed by the EU is deeply misguided. “Trying to cut the deficit from 8.5pc to 3pc in two years during a recession is a recipe for disaster. The Germans are crazy,” he said.”
It looks like we’ve had a good, blood-charging canter here around the usual course and over the usual fences – and ended up, again as usual, back at the starting line. Nothing ever really changes; the entrenched positions are shored up. Churchill’s ‘dreary steeples of Fermanagh and South Tyrone, rising about the mist..’ have been re-incarnated in the modern era.
The Government’s course is set; only ‘events’ will change it in any substantive respect. It’s impossible to predict when these ‘events’ will occur – or what form they will take; but ‘events’ there will be. And they will be both internal and external. Martin Wolf’s FT piece – also in today’s IT – is characteristically informative. At core this crisis has always been about imbalances – both in terms of economic power and current accounts. The tectonic plates underpinning the global current account imbalances have been shifting for some time. There seems to be some evidence that the smaller plates in the EU are beginning to shift – combined with a growing policy recognition that they will need to shift.
I haven’t accessed the Goldman Sachs analysis to which Martin Wolf refers. But I’m not surprised at their assessment of Ireland’s international competitveness, given the massive internal devaluation the non-sheltered sectors have both experienced and participated in. But unfortunately it tells only half of the story. The sheltered sectors sail sedately on – largely impervious to the economic damage they are causing.
And this brings us to the unresolved imbalance in economic power. This Government may be an elected dictatorship – and more securely ensconced than any in living memory – but equally it is a prisoner of the coalition of influential narrow economic sectional interests which actually governs this country by default. When Woodward and Bernstein were trying to piece together how far up the authorisation of the Watergate break-in went, their ‘Deep Throat’, Mark Felt, told them to ‘follow the money’. We need to ‘follow the power’.
The various sectional economic interests wield enormous power to cause disruption in society and the economy – and some possess much more than others. It’s probably a little unfair to single them out, but ESB workers could bring the country to a standstill in a couple of hours. Given the reliance on imported pipeline gas – and the extent to which electricity generation is gas-fired – BGE workers could probably do the same. Other professional, commercial or occupational groupings might not have the same immediate power or ability to cause such widespread disruption, but the disruption could be significant and could bring a government to heel very rapidly.
Just because this power is rarely, if ever, exercised – and all governments since the late ’80s have gone out of their way to minimise the possibility of its exercise by bribing these interest groups at the expense of consumers and taxpayers, doesn’t mean it it doesn’t exist – or wouldn’t be exercised.
One only needs to look at the extent to which the Government has whittled the Troika’s (very limited) structural reform programme down to almost nothing. It’s a case study of the exercise of economic power over government in action.
Well, the sheltered sectors should enjoy it while they can, because this can’t and won’t last forever. Unfortunately the resolution is likely to be drawn-out, messy and possibly incomplete – and the vast majority of consumers and citizens will continue to suffer unnecessarily and excessively.
@ Paul Hunt
I have yet to see you produce one single piece of empirical evidence/fact or number to support your argument that structural reform will solve our economic problems (which you have made around 5 times in a different way, and your last post clearly indicates that you mean the public and semi-state sectors).
The only vested interest that is holding the government to ransom is those who hold financial market power. It is corporate business power that governs the policy paradigm within which public policy decisions are made. ESB workers my eye.
Thought provoking post. But I still want to push you on the substance.
We need to go to the roots of excessive prices in the non-traded sectors. Somewhat surprisingly, you have played down the role of excessive wages in the past. Very crudely, this leaves profit rates, static inefficiencies and dynamic inefficiencies (ie inappropriate investment policies)
I know you have thought a lot about the details. I don’t think progress will be made until we get more specific, and the precise effects of specific vested interests and poor organisational design is highlighted. Otherwise, each of us can agree with you, happily thinking you are referring to somebody else.
Just experienced my first earthquake tremour — on a 20th floor!!
When the facts change…
Interesting reaction to the information on the low German Eurozone surplus.
Last month Ireland’s Department of Enterprise, Jobs and Innovation bragged in respect of 2011 that “Ireland had the third largest trade surplus in absolute terms in the EU, behind Germany and (narrowly) the Netherlands. It was notable that many of the larger countries had very significant deficits.”
There is a lot of superficial analysis of trade — China makes about $7 from every iPhone produced but its exports rise by the full cost of manufacturing including most of the components which are imported.
In 1980 when Greek debt to GDP was at 30% trade with Germany was almost in balance. Since then the value of German imports from Greece hardly changed until 2005 while exports from Germany quadrupled.
In 1980, Germany’s exports to Italy as a ratio of imports was 111%; in 2010, it was 130%.
Without FDI (foreign direct investment), Ireland would be in the same position.
A convergence over time has to happen on both sides.
Greece for example has a very poor record in attracting FDI compared with neighbours.
Much of trade is in the control of major companies and Germany’s VW and its SEAT car subsidiary in Spain shows how gains can arise.
SEAT exports 80% of its output and had a 22% rise in exports to Germany in 2011.
Germany has a long tardition of exporting and had an export ratio of almost 20% in 1910-1913.
Eurozone countries like Italy, Spain and Greece have had trade deficits with Germany since at least 1980 — 20 years before the euro launch. The IMF says the euro is a continuation rather than a structural break and the Fund’s statistics show that since 1999, Germany’s trade surplus with the rest of the world has grown faster than its surplus with the other Eurozone countries — and faster still with European nations that have not adopted the euro.
The next big trade challenge for Europe will be to compete against Chinese competition on home turf.
Italy has few big transnational companies which puts it at a disadvantge when it comes to trade.
To avoid duplication – and for the sake of brevity – I’ll try to pick up some of Aidan R’s points in my response.
I’ve done ‘substance’ endlessly over the last 9 years, as I’ve mentioned previously, in these continuously emerging and farcical policy and regulatory ‘public consultation’ processes – primarily in the energy area, but also in some other sectors. It hasn’t made a blind bit of difference. Indeed it has earned me the label of being unhelpful and difficult; I have had my prefessional integrity traduced; and it has deprived me of work opportunities. There has been a significant opportunity cost.
I do, however, receive some moral support, via private communications, from people embedded in the ‘system’ who agree with my stance, but are unable or unwilling to go on the public record. There is a genuine ‘omerta’ of which the Sicilian Mafia would be proud.
The other key factor, as, for example, David Begg might put it, is that I have no ‘public standing’. Irrespective of the depth or quality of the analysis I produce it is simply ignored or dismissed without any consequences for those who do so. Nine years ago, when I kicked off on this, I did secure some traction with a couple of journalists in the Indo stable, but, subsequently, an editorial decision was made that there was ‘no story’ in the case I was advancing. Since then, media interest has been almost zilch.
Some people, of course, will say, conveniently for them, that the reason I’ve secured no traction is because the case I’m advancing has no merit. But the private communications and background feedback I’ve received provide sufficient confirmation for me. There have also been some supportive pseudonymous comments on this blog from commenters who conveyed the impression of being some what ‘in the know’. And the ferocity of some of the attacks, generally wthout any basis in evidence, from those representing these vested interests provides final conformation that I’m on to something.
It is, quite simply, a total imbalance in economic power. I am, unofficially and, by default, self-appointedly, seeking to represent the collective interests of the vast majority of consumers and citizens whose collective interests are not being advocated or represented effectively. The representatives of the ‘producer’ interests – in the broadest sense of the word – dominate the formulation and implementation of policy and regulation. There is no counter-balancing or counter-acting location of power.
So any amount of evidence or analysis that might be presented won’t make a blind bit of difference. And, in any event, conventional neoclassical microeconomic analysis is seriously deficient as a means to address the political economy of these sectors.
I did nurse the vague hope for some time that if a few economists with some ‘public standing’ were to take up the cudgels in this area it might be possible to encourage some movement by government, but I can see now that that is a lost cause. It would be more futile than the Charge of the Light Brigade’.
The current situation cannot be sustained indefinitely, but there is no way to initiate beneficial change from the outside. We’ll just have to wait for ‘events’. We can’t be sure of when or what, but we can be sure there will be some.
“Just experienced my first earthquake tremour — on a 20th floor!! ”
Please do get off the 20th floor as you never know what this one might be a prelude to and I rather like reading your comments!
Same old same old. This is all heading nowhere fast
@ PH It won’t be too long…the events will be external in the first instance I’ll bet.
The really galling thing is that the opposition to any sort of meaningful internal devaluation in the sheltered sectors is not the preservation of pay levels related to the marginal value of output; it is the determined preservation of anti-competitive practices, of monopoly profits, of costly structural and financing ineffiencies and of widespread rent-seeking.
There is little enthusiasm in the present government for privatization. The last government’s efforts weren’t particularly inspiring or successful. Moreover, there was always the suspicion that the hand of cronyism was writ large.
It has often amazed me that an entity like the department of Agriculture hasn’t been subject to increased tendering for its work load, most of which consists of form checking and signing off on cheques from the EU. FAS is another body, literally, that should have been sliced up by private tendering with its main role one of quality assurance. However, the unions would never wear it and the politicians bicker over which of their friends could most benefit from which slice of the cake.
It was only relatively recently that the past Taoiseach Cowen thought it wrong to ask senior counsel at whatever tribunal to adjust their daily fees down by €250; an excess due to a clerical error in the DoF. There wasn’t much harrummphing by the usually voluble opposition at the time.
Only a realist believes in the need for miracles.
Tut tut! Seeking the high moral ground again.
Gather the family and Get the fu*k outa there NOW!
There is nothing more insane about the current market state then exporting cars to Germany.
Imagine the waste of resourses it takes to assemble the product from various plants and then reexport the product back to Germany !!
This slave arbritage actually destroys net wealth but transfers the remaining surplus more effiecently.
Although I have heard car manufacturers these days want to remain closer to their markets as the real costs are rising and credit cannot be used to buy cars.
Unfortunately for those wishing Mr. Hennigan a speedy exit from the 20th floor – you can’t use the lifts and you can’t use the stairs either, until they have been checked to be structurally sound. Long before you could use either, you know whether the building is still standing… Jakarta… 6.8… 39th floor…
@ Paul W
Will it be:
1: Spain blowing all the bailout money?
2: Spain + Italy blowing all the bailout money?
3: Oil spike
4: something else
While I disagree with you that tinkering at the edges through privatisations, regulation, consumer afvocacy etc. I do agree that there is one event that could act as a powerful catalyst for change. That occurs at the back end of May.
I think a no vote would cause an outbreak of the trots and I am not referring to the Boy Barett.
It will be death by a thousand cuts with the final blow being oil over $120 per barrel.
Although one should never underestimate the Germans and the French who will both enjoy a conversion to Keynesianism as the unemployment rate ramps up.
Coincidentally, I watched an excellent National Geographic program on Monday called ‘Asian Tsunami’ on the 2004 disaster.
There are 5 clips here;
I firrst thought there was something wrong with myself (maybe?) rather than a tremour.
5. Bombs raining on Iran (followed by 3, followed by 4 repeating itself).
Check the calender for when moonless nights occur over Persia. That should give you some indication as to timing.
I wonder if they’ve stuck the moonless night algorithm into automated trading platforms yet? Moonless night lads, better go short on everything except oil.
In 2008 another grandson of Honey Fitz, Senator Edward Kennedy by endorsing Barrack Obama as the Democratic Party candidate for President, copperfastened the election of the first afro american President of the United States and leader of the free world.
@ Eureka. I agree with the thousand cuts’ comment above. Who knows…however history illustrates that it will be big! The extent of previous leverage, current deleverage process is little appreciated or understood. The US has already signalled that it will not provide a backstop…not in a position to do so…out of bullets. War is always a gamechanger…However, overall I’d bet it will be crystalised /triggered by lack of growth in Europe and an increasing downward spiral as a result.There will be a tipping point…