The Irish Economy
Gavin Barrett tries to clarify some issues in this IT op-ed.
Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund
QUESTIONER: And just a separate follow up. For Greece, in the review, or actually as part of the new EFF agreement, the Fund made it clear that any financing gaps that developed, Europe had given assurances to the IMF that they would cover those financing gaps. But are there similar assurances from Europe on Portugal and Ireland for any potential financing gaps there?
MR. RICE: Well, I think really the question is best addressed to the Europeans, but I think at several points over the last several months the governments of the Euro zone have made clear their commitment to the stability of the Euro zone, including providing resources as needed to program countries, provided the programs are being implemented effectively.’
… including providing resources as needed to program countries, provided the programs are being implemented effectively.
MR. RICE: I won’t get into the specifics of the different programs, but again, just to repeat, and I think if you look at some of the declarations made by the European governments, public declarations over the past several months, they have made clear their commitment on the financing side to program countries. Again, provided the programs are implemented effectively. So you know, I didn’t mean to be flippant by saying ask the Europeans. But it’s just I think it’s a matter of public record.
Time to bury the spin_dummy that NO funding will be available should the Citizenry, in its wisdom, decide to vote NO, for whatever reasons.
Another bank shill bleats for his salary to be denominated in euros.
When the end finally comes, when the euro goes supernova and both UCD and the public and private pension funds go under, I hope all you economists and commentators will take pride in how you corralled the country down the road to ruin, frightening people away from every alternative, driving them ever faster over the cliffs of utter ruin.
Here’s one for the Dork. Gavin Barrett et al play the part of the Bull, the Irish people are the cattle. All your pension funds and cozy retirements are represented by Tadgh. Of course, in classic Irish form, ye won’t be happy until everything ends in disaster.
A appropriate piece – I wonder what John B would make of it all – with all
these Euro fascists coming into quiet pubs telling us what we can & cannot do in the interests of our health of course.
Altruistic to the core they are…….
The Euro system is the beating heart of the evil market state – it was designed to waste rather then create.
I will take any opportunity to hiss at the dragon.
As playing the cute Hoor never got us anywhere but the scrapheap.
Once you realise they aim to kill us anyway things become somehow easier.
Our petty elite do not believe in the concept of sovereignty – they wish to suck the ample Teets of the Europa cow.
But I really don’t give a toss what they think.
But make no mistake – their masters will try to crush us , but remember even if you voted yes they will crush you anyway.
There is really no easy way out – we are confronted by a perfect expression of pure evil.
Make your choice….. but this is a political statement as much as a economic one.
They have been in planning this for at least 40 years and indeed before during the war itself.
Make the demons angry I say.
Their Jericho sirens will be their response.
The euro will not survive without a minimum federal union in the long run and if the genesis of this union has to begin with the Fiscal Compact or some similar alternative initial rules, most likely there would be some members who would require them to be ratified by national parliaments.
Ireland which has only one real ally in Europe – – the UK — will not stop progress. However, no treaty would ever be perfect and would be opposed by a significant chunk of Irish voters no matter what.
It’s interesting to observe how we love these arguments where there is an overseas aspect or bogeyman. Internal issues such as sustainable job creation and reform of failed systems is boring not only for those with a grip of the public megaphone but likely a lot of voters.
There are no simple answers for complex economic issues or outcomes. However, we do have believers in fairytales that German banks for example were the primary cause of the Irish crash when most responsibility should lay with politicians, voters and a supporting cast.
On alternatives, unless defaults and proposals to leave the euro are on a mutual orderly basis, a country that has an indigenous-based export ratio of 12.4% of GNP (gross national product) and a current standard of living that is not sustainable irrespective of the outcome, has to be prepared for very grim times that devaluation would not alleviate.
On the IMF/EU funding issue, let’s agree that it would be a grey area for some time and it’s interesting that the debate on both sides is dominated by individuals on the public payroll (ministers, TDs, academics), commentators from large media organisation and officials from trade unions/professional unions/big business lobby groups.
Exporting to armchair exports often seems an easy challenge and may just come down to offering a better price. It is not of course and how the uncertainty would affect struggling firms, can easily be brushed away.
Much of the analysis on solutions for the debt crisis are superficial.
There is both a region-wide dimension involving the ECB and regional convergence but there is less attention given to what individual countries need to do to also help themselves.
Much of the international trade in goods and services in the OECD area, is dominated in each sector by a small number transnational firms: commercial aircraft; mobile/smartphones; cars; software/PCs; computer chips; food; household/health/personal care products; chemicals; power generation (GE, Siemens). There are opportunities of course to sell into global supply chains and niche areas.
Ireland and Spain (excluding the property booms), Italy and Portugal did not hardly grow at all in the years preceding the crash. Greek growth was fuelled by government and consumer spending, and low credit costs. It had a trade deficit of €19bn in 2010.
Why was there no real sustainable growth during a global boom?
Vested interests would like large transfers without having to lose priviliges but this process will only work if it is a two-way street.
Having been ravaged myself by dead sheep or morons from the safety of anonymity, isn’t it a bit shrill to call an individual a shill, when it’s not possible to wonder what you motivations may be? Did your mother ever tell you that manners maketh man?
According to what I am reading – from various sources, “the costs of failing/not failing to pass the referendum COULD be enormous”.
That’s as about as vague as you can make it. So, on balance a No vote could be an be enormous cost, and our Constitution remains unfettered (for the moment anyway). Or on the alternative balance, a Yes vote could be an enormous cost, and our Constitution is fettered. Is this some sort of prisoner’s what-you-may-call-it, or what?
I’ll vote No.
Speaking of paper pieces, Dan O’B in the IT Business Today? I had a good chuckle at this. The possible answer is straightforward (there are many unknown unknowns – confounding variables, and all), but you have to wonder. This is not the first time Solow was foxed. 😎
@ Brian Woods Snr
Dan O’Brien needs to look a bit closer at this issue of productivity.
BEA statistics imply that manufacturing productivity rose by 74% from 2000 to 2010 but if jobs are outsourced to China, a firm can achieve a rise in productivity with less American workers.
Dan says: “Irish workers’ productivity growth has outpaced that of their counterparts elsewhere…” – -I’ve enough said on that fairytale for the moment.
Basically, the US and Irish data fool a lot of people.
So trying to identify gains from IT is difficult when the overall data maybe dodgy and not consistent.
Their productivity is in fact waste expressed as profits …. China a coal superpower !! began importing Australian coal during the height of the boom.
You are not asking yourself what the function of these arbitrage activities truely are.
@MH: “So trying to identify gains from IT is difficult when the overall data maybe dodgy and not consistent.”
Ding! Ding! Garbage in, garbage out!
Solow (and a lot of other econs) needs to look to his economic Model-in-Use. I fancy that a demographer-engineer person would spot the possible explanation right away. 🙂
See Ayers + Warr* for the demolition of Solow’s Residuals (for which he was made a Nobelman!).
*The Economic Growth Engine: How Energy and Work Drive Material Prosperity. This text is not on ECON 101 syllabii. I wonder why?
A very useful article by Gavin Barrett. (Gavin has also promised to do a guest post for this blog, allowing hopefully for some of the constitutional questions that have come up on the blog to be debated.)
One point worth highlighting is that Ireland’s MTO is already -0.5 (that is, a structural deficit of 0.5 percent). Given our debt levels, the way the MTOs are calculated means there was very little change of the MTO being lowered (i.e. a higher allowable in structural deficit) in the foreseeable future. As the path to the MTO follows the SGP procedures, the new structural deficit rule does not constrain Irish budgetary policy beyond what is there already.
th May 2012:European Central Bank (ECB) chief Mario Draghi has urged eurozone leaders to come up with a 10-year target for the common currency, saying they should accept more transfer of powers if they truly want a fiscal union.
Held exceptionally in Barcelona instead of the ECB headquarters in Frankfurt, the monthly meeting of eurozone’s central bank governing council on Thursday (3 May) was an opportunity for Draghi to explain what he meant last week when he said a “growth compact” is needed along with the deficit-cutting measures taken by most governments. “There is absolutely no contradiction between a growth compact and a fiscal compact,” the Italian banker said in reference to the treaty on fiscal discipline signed in March by 25 EU leaders. He went on to explain that governments have to stick to tighter budgets, while reforming labour markets, increasing competition, re-balancing employment towards young people.
“I can understand the anger of young people, of poor and jobless young people. I can understand it very well. The answer we can give as policy makers is that the policies suggested or implemented are the policies we are convinced to be the right ones.”
“But most importantly is that we collectively have to specify a path for the euro. How do we see ourselves in 10 years from now …We want to have a fiscal union? We have to accept the delegation of fiscal sovereignty from national to some form of central [government],” he said. [THIS MEANS A FEDERAL EUROPE, AND MEMBER NATIONS WILL NOT HAVE THE AUTONOMY THAT EVEN THE DIFFERENT STATES HAVE IN USA. JBeditor]
In getting there, politicians should however refrain from talking about a “transfer union” as a starting point, he said, in reference to richer countries automatically paying for poorer ones, a concept most loathed by Germany and its independence-wary Bundesbank. [RED HERRING]
“That is why the fiscal compact is so important, that is the starting point,[ ” Draghi noted [SIGN FISCAL COMPACT – THIS TREATY – AND FEDERAL UNION OF EU HAS STARTED – also please note that the Dail pamphlet omits to designate Ireland as a Republic beside the other EU nations.]
Yes I have noticed that omission before but got no response from the Great & the Good on this site ?
I stated that the Northern Irish executive should be informed of this.
Me thinks De Gaulle was right about us.
But beside our fake independence would you really trust such a distant executive / fiscal body ?
re- Brian Woods: ”So, on balance a No vote could be an be enormous cost, and our Constitution remains unfettered (for the moment anyway). Or on the alternative balance, a Yes vote could be an enormous cost, and our Constitution is fettered. Is this some sort of prisoner’s what-you-may-call-it, or what?”
I think the real crux of the issue, and one that FG/FF/Labour ignore – but so for the most part do Sinn Féin in their ‘No’ campaign – , is the fact that this is a preamble to fiscal convergence. It is a highly dubious, and unstable, process that seeks to dissolve sovereignty and established democratic representation by sleight of hand. In europe at least there is an awareness that this is where it is headed and supporters of federalism or what ever other guise a despotic central bank chooses to go under openly declare their political hopes and ambitions. In Ireland there is nobody who even admits that it is happening and FG still talk about regaining sovereignty with a straight face.
We hear again and again how the EU stems the tide of fascist nationalism, and prevents war. The fact is never faced that war was the by-product, and it is the ambition itself to establish macrogovernment that is the problem.
They realise there is a problem, alright; but only ever talk about making us conscripted ‘europeans’ ”feel” like we are involved in decisions. Well, we have a democratic system in place that, for all it’s many faults, makes the alternative that is being foisted on us a retrogressive, democratically degenerate alternative.
Just as there is no subtracting the economic aspects of this treaty (the first of three, apparently), there is no validity in arguments that ignore the political reality and dangers inherent in it.
I think it is time we began our extraction from this project, better late than never.
The Dork: ”I stated that the Northern Irish executive should be informed of this.”
In what they’re planning, Ireland and other individual countries will have less power than the Northern government currently holds. They at least can determine how their budgets are spent.
You have noted how this Central bank makes very political noises and the FED or BoE would not dare to utter.
As for Ireland I always thought it was a Geographical rather then a political enitity … maybe someone better tell us Cork boys and Downpatrick brethern if things have somehow changed.
Its the least they can do for us simple folk.
We’ve gone way past the point of worrying about manners. The country is bleeding out, and instead of patching it up, our rulers continue to suck at the wounds, calling for fresh gashes as the old ones dry up.
The writer of the linked peice is a UCD researcher with a grossly inflated salary and a princely pension, both paid in the same currency the German’s sell their Audis in. Not to single him out of course; he is but an representative example of our entire governing classes, those who at every stage of the process have more to lose from leaving the euro than they have to gain. Ergo, they will advocate, design, and impose any hardship (short of that which will affect themselves) on the rest of us in order to continue their gravy train. This class includes probably every post writer, and not a few commentators on this site.
The banks finance such polemics. That steadfast opponent of transparency, justice, and the rule of law, The Irish Times gives a place on the stage to every piper playing the bankers tune. Anyone with even the most morbid piece supporting the banks, ECB, the government, or just plain fear-mongering is sure to be published in full. And for such leal service, the Times can enjoy generous loans and patronage from the banks to pay for all its expensive new supplements and specials.
I don’t know which way the general business community is going though. The smart boys are schmoozing up the banks and government, correctly identifying the only likely source of easy money for the next decade or so and shifting their positions accordingly. Those unable or unwilling to do so, and facing the real prospect of collapse, are probably having something of a “Damascus” moment. John Corcoran’s recent praise for Sinn Fein was a watershed event.
Personally, my position is unchanged from 2008: The country should default, balance the budget in one year, and move on. Leave all the banking wasters with their own gambling debts, and give honest, intelligent people a chance to make their own future instead of pawning it to someone else. VOTE NO.
“The country should default, balance the budget in one year, and move on. Leave all the banking wasters with their own gambling debts, and give honest, intelligent people a chance to make their own future instead of pawning it to someone else.”
I am so voting with you. +1
But you balance the defecit books by simply printing more money – the waste will manifest itself then.
In open view.
I am with you as well, reduce Public Service salaries and Welfare to EU average levels. Stop the mini bus that brings the kids of Senior managers in the ESB to after school activities. Make the staff in the HQ of BG in Cork bring in their own sambos rather than bussing them to a nearby hotel. It goes on and on.
@ Mark. Thanks for that commentary. Not much I would disaggree with.
Attempting to ‘fiscally weld’ the disparate parts of Europe together is a dead game. Though expect heroic efforts to attempt this. The fact that it has failed so far will only encourage the drivers to endeavour to persevere. Successful failures are all the rage at the moment – like Miu Miu handbags!
Folk will get very frisky if they believe their sovereignty is in any danger. Think loyalist! They might despise their own domestic pols, but they will rapidly close ranks and rise up against a foreign one – so matter how good a reputation they carry. Its a very fine line these euro pols are walking – one slip and they impale themselves on shit-smeared stakes.
I think that our current batch of politicians are too young and arrogant to remember what happened the last time someone had the bright idea to ‘unite’ some parts of Europe. We won’t have a reprise of that episode, just a lot of hissy fits and Cameron -style, majestic exits. Dead sheep flogging each other.
A useful adjunct to this thread, the commentary by Arthur Beezley of the IT.
With Kozy gone away, Mer will simply pine away ….
FYI Berlin Calling [h/t The Skibbereen Eagle
It could be an uncomfortable weekend for German Chancellor Angela Merkel, with three crunch votes taking place on Sunday. Elections in Greece and France could torpedo her strategy to solve the euro crisis if voters reject pro-austerity candidates, while a state election in Germany may weaken her conservatives domestically.
Angela Merkel’s position as German chancellor is becoming increasingly contradictory. At the federal level, she reigns unchallenged, while her opponents falter. But at the level of Germany’s individual states, her power is crumbling and her center-right Christian Democratic Union (CDU) is bracing itself for further setbacks. At the European level, meanwhile, she has become a figure of hate for many, as her pet project, the fiscal pact, is increasingly called into question.
Who is Mario Draghi? He created the terrible trap in the “Fiscal Compact” – December 2011, European Central Bank president Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion Euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s Eurocrat overseers demand.
The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as Member States representing 90% of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 youtube video titled “The shocking truth of the pending EU collapse!”, originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states:
The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt…. The authorized capital stock shall be 700 billion euros. Question: why 700 billion? [Probable answer: it simply mimicked the $700 billion the US Congress bought into in 2008] . . . .
[Article 9]: “… ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them … within seven days of receipt of such demand.” … If the ESM needs money, we have seven days to pay… But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM? …
[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8… accordingly.” Question:… 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up?
[Article 27, lines 2-3]: “The ESM, its property, funding, and assets … shall enjoy immunity from every form of judicial process …” Question: So the ESM program can sue us, but we can’t challenge it in court?
[Article 27, line 4]: “The property, funding and assets of the ESM shall . . . be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question:… [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty!
[Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them… and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? … The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies?
Last November, without fanfare and barely noticed in the press, former Goldman exec Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments – lavish money on them at very cheap rates. French blogger Simon Thorpe reports:
On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent”, but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.
The money was gobbled up virtually instantaneously by a total of 523 banks.
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