Successful Bill Auction

The remarkable thing about this morning’s 3 month t-bill auction is how unremarkable it was. The whole thing seems to have gone off without a hitch. Happy days. We’re not back in the bond markets just yet, but it is a good first step towards a return to business as usual.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

109 replies on “Successful Bill Auction”

Why does any institution buy a three month bill yielding <2% with cash?
Cash deposit pays more than 2.5% at present for big money?

If Greece has been going to this market all along in order to keep a toe in the water, why did we disappear out like a scalded cat.

It replaces mortgages and stuff on the Banks asset side of the balance sheet ,deposits are its liabilities.
Your tax goes to restoring the banks profitability as your deposits /the banks liabilties are subtracted to pay interest on the banks assets.
Its called deleveraging but without the production of new money.

Banks are collateral junkies – they in fact don’t print new money , they produce credit.
Even if their practises destroy society by robbing it of optimum quanity of medium of exchange that more accuretly reflect input output costs ,people continue to allow them to pump and dump entire societies.
Only Goverments can print new money.

Its a very sick system.
Its why we need manic “growth” even when it destroys general wealth through resourse depletion.
And now manic Austerity to bail out their growth malinvestments.

Reason they are going to the Market now is about optics and momentum. If they had stayed in the very short term government bond Market they would not have been able to get on the bloomberg ticker today and use that as a marketing springboard.


We have a fairly substantial cash buffer which means we don’t need short-term funding to offset fluctuations in revenue and expenditure or to fill gaps between loan drawdowns. I’m not sure if Greece have this buffer.

Per the NTMA there is almost €14.5 billion in the Exchequer Account.

@ Steve

Happy days indeed, congrats to the NTMA.

Have a party and give those hard-working NTMA folk performance bonuses!

The fact is that this has no relevance to whether Ireland can see the back of the Troka in 2013.

Who knows what the international situation will look like but what is more certain is that Irish growth will remain very weak into 2014.

Returning to the market and then have yields spike wouldn’t be very clever.

@michael h

Reading the coverage from afar, it just knocks commonsense on the head that so few are willing to call this act for the total farce it is.

Seeking short term money by a state fully funded for a period longer than than term is just a pitifully abject lesson in ‘cretinomics’.

For goodness sake, I thought Official ireland couldn’t lower the bar any further in self-delusion. But I was wrong.

@ The Alchemist

as mentioned in the other “Ooooh, is it a bill or a bond?” thread, the lack of imagination over why the NTMA would raise funds, what it means that they can raise short term funds, or what they do with them is quite depressing.

@ Jagdip

not at all off topic. Its all part of a process. Tbills one week, hopefully good data the next. Start adding these up, if they come as hoped, and you have a pretty good hand to play.

@Bond, EB

Well Draghi’s comments today on the economic outlook have taken the gloss off the recent rally and the spreads on Spanish and Italian bonds are moving in the wrong direction again.

Adding fuel to the mix was the tepid outcome to the Monti-Merkel summit. Germany still has little appetite to allow the ESM to directly fish for bonds in the secondary debt market.

None of this is good news for either a deal on Irish debt or an early return to the markets.

The League is not won in the first half-hour of rusty pre-season training – but it can be lost without pre-season training.

NTMA is simply doing its job.

@ Alchy

Ireland can only do so much on its own. If Spain or Greece or Italy blows up, there is nothing the NTMA can do to respond to that. All they can do is assume everything else stabilises, and try to plot their own course out of this. The t-bill sale is a small, but not irrelevant, part of that process.

@ Bond Eoin Bond

“the lack of imagination over why the NTMA would raise funds, what it means that they can raise short term funds, or what they do with them is quite depressing.”

What imaginative ideas are you suggesting the NTMA may have for this €500 million? I would have assumed it gets lumped in with the rest of the general exchequer funds.


‘No Measurable Effect’
ECB Interest Rate Cut Inspires Little Hope

The European Central Bank’s interest rate is now lower than ever before. But, even with the cut, few believe it will do much to energize the euro-zone’s flagging economy. The real problems are to be found elsewhere — and they aren’t getting better.

@ Seamus Coffee

Why am I not convinced?

“We have a fairly substantial cash buffer which means we don’t need short-term funding to offset fluctuations in revenue and expenditure or to fill gaps between loan drawdowns. I’m not sure if Greece have this buffer.”

The last time I heard this sort of talk, was back in July/August 2010 and it resulted in the NPRF having to be thrown on the table as part of the Troika MOU. I am in debt for 100,000 but have 5,000 in my current account and announce I’am flush for cash! We have services to handicapped children being cut left and right and you are telling me we have substantial cash buffers?

I am convinced that had there not been such loose talk, not to mention the constant real and imaginary dipping of the fund, that it would have been regarded as being “off limits”. German mentality is not to tap a fund that was established to help offset the cost of future pension liabilities and throw it into insolvent banks. However, they saw how incompetent we were and probably decided that if it was not demanded it would most likely be squandered on salary increases and the like. In that analysis they were correct. When this fund was being established Mr. Honohan warned that if it was not ring fenced it would disappear in the first economic crisis. In that he was correct, but how ironic it was that it’s his signature that appeared along side that of the late finance minister. Essentially liquidated the fun, what’s left 4bn? Some say it is “invested”. It will be very interesting to see the rate of return when the ESM starts taking equity stakes in our banks at market prices.

@ Carson,

The lack of imagination I would guess is people thinking that this has something to do with raising €500 million at whatever cost and wondering what will be done with it. This is not about raising €500 million. With nearly €14,500 million in the Exchequer Account we have no need for three-month money. This is about the act not the outcome.

If we borrow 100 Euro at this rate does this mean that we have to pay back 101.80 Euro in October
And if we have to roll over that does that mean that we have to pay 101.8*1.018 in January 2013
What is the annual rate of interest on these )assuming rolling over?
And how can we do this when our economy is not growing?

That would be €14,500 of Bailout money including an element of as yet unspent taxes. As a state we are not not capable of funding ourselves from current taxation which is why we are in a program and facing another one in 9 months time. This along with being saddled with a banking system that is desperately trying to meet its deleveraging commitments under the current MOU of 83bn. This against a background of some of the highest levels of personal debt in the EU. Constantin has alluded to this private corporate and sovereign debt time bomb which is over 600% of debt to GDP. That’s is why there is no wriggle room for government to raise taxes only possibility was to cut public sector salaries and welfare entitlements CP has ruled out one and the other will not be done as long as we have access to debt markets.

Surely there are very few people who are not painfully aware that today was merely a PR exercise?

More to the point of celebrating down at the NTMA is did we laid off any personnel down at the NTMA over the last two years when they could not sell a single bond or have they been sharpening their pencils? Presumably, they are now red in tooth and claw waiting to launch our long term bonds next year if the opportunity presents itself. Otherwise we will have to resort to bailout No. 2 from ESM with conditionality/ MOU. It’s sad that the whole economic thrust of this government is an obsession with borrowing and more borrowing. Happy are the days when we can fill our coffers with borrowed money and guarantee that our recession is dragged out for as long as possible without having to make structural changes. Mohamed el Erian has said that until we realise we are desperately need structural reforms we are going nowhere. Meanwhile we are breaking open champagne.

….are desperately in need of structural reforms we are going nowhere. Meanwhile we are breaking open the champagne

@ Eureka

1.80% is the annualised rate, ie 100 today returns 100 * 0.018 * (98/360)

(it’s 98 days in duration for some reason…)


It reminds me of a Bob Hope Vietnam tour with the canned laughter and applause to Hopes ancient Jokes
But without Raquel Welsh or Madeline Hartog Bell………… keep the spirits up amongest other things.

Yes I can hear our great leader now
“Come back next year when our country & people will have peace , freedom and Independence”

Begins 1H 22m

Even the French are at it with their new High speed lines.
It because they are lacking monetary sovereignty – goverments cannot spend without getting into debt to the banks , so they try to hide it amongest other programmes but this creates much bigger real costs.

The west is dead.
Long live the east.

@ Robert Browne

You are getting near to it there. NTMA is in danger of fading into insignificance, with consequent threat to its internal budget. The opportunity for a bit of positive PR was too good to miss. That’s about the height of it.

T-Bills 90 day 2% can be and are sold for less than face value. We do not have the whole picture.

In any case someone believes that our chances of going tits up within 90 days are near zero. I agree.

@ dork of cork

have been following this site for best part of twelve months now and can honestly say i have no idea what your talking about most of the time, everything you write seems to lead onto transportation figures and stats, don’t know if its just me but i know alot of people who follow this site, (who aren’t economists), to try to get an understanding of whats happening in this country. I don’t mean to personalise the matter, I’m sure your a smart guy/woman, just maybe simpler next time..
Rant over!!!!

Who bought the bills anyone?

Who cares?

The state just got €500 million for free into its pockets; it’s time to break out the bonuses and free PS jobs. Worrying about who gave the money or how much has to be paid back is, like, SoooOOO 2011. Let the good times roll man.

(Besides, it was BOI)

@robert b

A country with one of the highest levels of public and personal debt in the developed world, indeed.

Yet the same country or should I say its Establishment is gummed up with looking over the political shoulder reflexes that still four years on it cannot muster a detailed inquiry into the decision, the bank guarantee, that bankrupted the taxpayer/small business owner and sentenced a generation of ordinary youth of the country to emigration. It makes the search for the Higgs boson seem easy in comparison.

Ah yes, the Gentry. Pass the 500 million around it must be time to appoint some more special advisors.

Is it just a week since Enda was telling everyone that would listen “don’t tangle with me!”?

Today he’s accusing Ursula of “assault” having been, while surrounded by minders, cornered against a (potted?) plant.

A week is a long time in politics.

Ireland to seek more money on markets in near future

Head of the National Treasury Management Agency John Corrigan said Ireland would take a “very opportunistic approach” in a series of steps to borrowing money from private lenders.

Mr Corrigan was speaking after his agency raised €500 million at an interest rate of 1.8 per cent, a better rate than expected, yesterday.

Investors offered the NTMA almost three times more money than the €500 million it had targeted to raise by issuing treasury bills that are to be repaid in three months.

During a conference call yesterday afternoon, Mr Corrigan said his agency would work to rebuild trust among investors around the world in order to be in a position to borrow even more cash so that the State could wean itself off EU-IMF financing.

Mr Corrigan said that there was “strong evidence” that the “vast bulk” of the bills were bought by foreign institutions.

Speaking at his monthly press conference, ECB president Mario Draghi warmly welcomed Ireland’s return to the debt markets, describing it as “very, very important”.

“Actually, it’s so important, that an event like this could be one of the various factors that are making the financial environment now a little less tense than it was a month ago,” Mr Draghi said.

“Ireland is a member country that, through extraordinary efforts, has run a programme which is on track, so much that Ireland returned to the market much earlier than anybody could have expected until two or three months ago.

“I think this must be a success which should be properly celebrated and is testimony to the determination of the Irish Government and the capacity of the Irish people to understand all this programme that needed sacrifices.”

EU economics commissioner Olli Rehn said the transaction was an important step. “It reflects growing international confidence in Ireland’s strong track record of programme implementation,” Mr Rehn said.

@ DoD
“Head of the National Treasury Management Agency John Corrigan said, Ireland would take a “very opportunistic approach” in a series of steps to borrowing money from private lenders.”

“Mr Corrigan said, his agency would work to rebuild trust among investors around the world in order to be in a position to borrow even more cash so that the State could wean itself off EU-IMF financing.”

Since when does “opportunistic” and “trust” go together? Verbal apraxia.

As for Draghi’s false, over the top praise. I think he would have been better served had he reduced interest rates to a minimum of .5% yesterday. These low rates should have been in place for the last 3 years they have been dragged kicking and screaming to these decisions.

So this week the Government raised €500m from mainly foreign investors and seized almost €500m from domestic private pension funds.

Last year, Colm McCarthy compared the four-year pensions levy to ruses pioneered by the Kirchners in Argentina.

To reduce the reliance on fickle foreign investors, the Government wants to see more of the private pension funds invested locally.

The head of a small public agency, the Pensions Board, whose own employer pension cost is the equivalent of average national earnings, has given underwater defined benefit schemes that are in deficit until the end of the year to produce rescue plans.

Independent News & Media with a deficit of €141m has already signalled who will be in the firing line and existing pensioners will have priority in accordance with current law, leaving many of those that have not yet reached retirement age with significantly reduced benefits.

So expect many other companies to follow and while the typical total funding of defined contribution schemes (no guaranteed payout) is 10-12%, this compares with the 30% at a public agency such as the NTMA – – to provide for a guaranteed payout.

In the parallel universe inhabited by some, returning to ‘market,’ seems a lot more alluring than addressing an unemployment emergency.

The politicians will soon head off for their summer break, the rest of the year will be taken up with budget issues and by February, two years after winning power, any chance of significant reform will have evaporated.

It’s exciting stuff that we could have the prospect to borrow money without apparent strings – – so the dwellers of the parallel universe believe.

Forecasts for GNP growth in 2013 range from 0.5% to 1% – – and these are forecasts!

@michael H

Unemployment is completely off the agenda. Curiously neither Draghi nor Rehn threw plaudits at the government’s response to an unemployment problems so widespread and entrenched that the Official Ireland’s timid media are too embarrassed to spend time on it.

The recent CSO figures showing almost 200,000 long term unemployed should have ministers brainstorming day and night but instead the bonds and bills cloud their thinking.

Many people in Ireland are having their daily lives clouded by bills of a different nature.

@Robert Browne

Methinks you might find better targets for your substantive ire than the NTMA. NTMA has/had a sound enough international reputation. I see no reason to dispute this reputation.

If one has a quibble, perhaps its dog insufficiently barked during the credit_riot times – then again, most other dogs didn’t bark either!

@The Alchemist

& Minister Noonan & X-Minister O’Dea

SEVEN of the country’s ten worst unemployment blackspots are in Limerick city according to new figures published by the Central Statistics Office.

The figures, which were collated from last year’s Census show that Saint Mary’s Park and O’Malley Park are the only two areas in the country where more than half the working population are unemployed.

According to the figures, 55.8% of adults in the John’s A electoral division, which encompasses St Mary’s Park, stated they were unemployed when the Census was conducted in April 2011.

Meanwhile, 55.2% of adults in the Galvone B electoral division, (O’Malley Park) said they were not working.

The Ballynanty (47.2%), Rathbane (46.5%) electoral divisions also feature in the list of the country’s top five unemployment blackspots.

The figures show that Limerick city has a total of 17 umeployment blackspots – which the highest for any local authority area in the country.

Other electoral divisions listed as being unemployment blackspots include Prospect A (46.4%) Glentworth C (46.1%), Abbey C (44.7%), John’s B (43.3%), Kileely A (42.7) and Shannon B (41.9%).

In addition to having the highest number of uneployment blackspots, the Census figures also reveal that Limerick city as a whole had the highest unemployment rate in the country in April 2011 at 28.6%.

Ireland’s Success Story!

In case you missed it, the ECB reaction to yesterday’s t-bill sale

“Draghi: Ireland is a euro area country that, through extraordinary efforts, has run a programme which is on track – so much so that Ireland returned to the markets today, if I am not mistaken. This is much earlier than anybody could have expected until two or three months ago. Even though this might not yet be part of a regular extended programme for a long period of time, I think that this success should be properly celebrated, and it is a testament to the determination of the Irish government and the capacity of the Irish people to understand and “own” this programme and make the needed sacrifices. I think this is very important. Actually, it is so important that an event like this could be one of the factors that are making the financial environment nowadays a little less tense than it was a month ago. I think this ought to be taken into account. ”


The policy is to call them scumbags and hope something turns up and when it blows up throw money at the problem

The future unemployment issue (or the continued loss of ‘normal’ employments) was flagged over two decades ago. Since it was a ‘future’ matter it was ignored in time-honoured political behaviour. Now that the future has arrived, displacement behaviour and hubris are the only political options available.

Our lack of employments will worsen. It was already intractable. The issue is also being felt in all western developed economies. Unless we can clone virtual workers ASAP we’re in economic and financial Shitsville. Oh dear! We already have those virtual folk – the’re called robots. 😎

Make friends with folk who own a farm or an allotment. Learn to grow your own food and collect rainwater. Being a good knitter would be a bonus. Access to fuel will be a big problem in Ireland. But sure who cares. Its all in our future and that’s awfully far away. Duh!

There is really no fuel problem in Ireland.
If our forefathers had access to such energy densities in the past they would have been on the Pigs back.
However we have a very severe monetary problem in this country – the money tokens do not even remotely accuretly convey the economic input / output price signals.
Just imagine if the country had a constant 10 units of energy that is equivalent to todays consumption.
But the goverment had printing power.
We would most probally have access to the same 10 units of energy tomorrow but the energy could be better used – such as for rational and I mean rational capital growth.
In practise the private car would become a transport system for your local GP and upwards while the Buses and Trains would turn Japanese.
This would leave more capital available to buy more buses and build more railways.

Instead our ministers act as Bag men for the Banks as their credit money “investments” would be shown to be even more non optimal the more money was printed by goverment.
Reading De paper today……
Shatters outbursts and actions lately are way out there man.

Who cares about bank debts , diamonds, gold and stuff ? – the collection of bank debts is destroying the physical economy of commerce.
Its getting in the way of efficiency.
Money as a medium of exchange.

Meanwhile he wishes to reduce the defence forces even further.
In the event of a natural disaster what can a nation do ?

There is something deeply wrong with this goverment – indeed all Irish Goverments.
They actually don’t govern in the interests of the people , they govern in the interests of the banks and their disastrous civilisation ending credit money system.

You don’t save real wealth by making more soldiers unemployed – you save wealth by going back to the Punt.
We need a 2-8 to 1 leverage system via printing.
This will dramatically reduce our high value euro money exports.

This is not rocket science folks.
Although one would think the purpose of this deflation is to simply get the Gold.

Energy is defined as the ability to do work.

Ever since the late 18th / early 19th century capital has been far superior to Labour in its ability to do work.
You have access to 100 horses or more when you drive to work in your modern chariot.
We no longer live in a classic slave state.
However the forces of capital have conspired to use most of us as conduits rather then sentient human beings in their quest for this power which is now expressed in a monetary form.

A massive decrease in new private cars sold in June. (CSO)

“Decrease of 40.7% in new private cars licensed in June
There were 5,481 new private cars licensed in June 2012, compared with 9,240 in June 2011, a decrease of 40.7%.”

This could actually be a good thing if Bus and rail passenger numbers were at record high levels such as the more optimal UK juristiction – but they are not.
(Ok….. the BoE does not actually print the stuff but keeps the yields down)

In Europe they do things the hard way.
Instead of Goods substitution as in UK you simply run out of tokens to do anything or go anywhere – a classic deflation.

Private Car regs have already gone past the Total Y2009 low of 54,000+ but it looks likely car regs will be lower then Y2010 / Y2011 confirming the massive structual shift in the market post 2007/8.

The car fleet is ageing rapidly me thinks……and yet the Euro boys continue to stop the flow.
Why ?
There is simply no reason why you should run out of money tokens.
The wastage of physical capital in Europe must be enormous.
All to save metaphysical capital.
Its not logical captain.

Seriously Dork more about fuel, cars and trains on a thread about treasury bills!

@ Dork: In respect of an ‘energy shortage’ I was referring to the overall aspect in terms of our current usage – which cannot continue as is. A decline is inevitable. When and where are not yet clear.

No amount of funny money can compensate for a shortage in a finite physical rescorce which has no chemical equivalent available as an economic substitute. And our pseudo-economists seem to have no inkling of the problem here. Presumably they have zero technical understanding of the ‘energy cost’ of energy. Energy inputs are simply ignored as a factor of production and as an essential support for our current Standard of Livings. Were we lucky or unlucky to have ‘discovered’ liquid hydrocarbon fuels? Imagine what it would be like if nature had only bequeated us the solid variety.

Methinks our social elastic is being drawn tighter and tighter until it can stretch no further. A dopey comment such as Shatter’s may just push the system beyond its Fail Safe point. The political Methane being generated over Big Phil’s shit tanks and household charge is slowly drifting into low-lying areas. Someone better ensure all ignition sources (political ones) are secure.

They are metaphysical representations of real capital
Without physical capital……….
No money , no energy , no food.
You die in this world of please no hunting gathering in my back garden.

Its yee guys who are divorced from the real world of stuff.
Money buys stuff – remember ?
Many people do not have enough tokens in their pocket because others waste physical stuff on a massive scale.
Therefore They can’t buy stuff as its all gone.
They go hungry.
They fall off the monetary cliff.
They die.

Greece points the way.
Its non sovergin people run out of symbolic representations of capital.
They stop buying stuff.
Some stop living when they can’t buy medicine stuff.

We are living withen a non optimum currency system where the monetary system does not give the correct informational inputs into the physical world of making or using stuff.
No stuff of the right kind that you need for life support and you Die.

Sure there is a shortgage of energy at the moment.
But thats a result of a catostrophic monetary system that has wasted resourses on a biblical scale to build stuff we don’t need rather then for basic life support.

It was the nature of the credit system to waste stuff as waste production pays interest on “sovergin debt”.
This waste production is what they call growth.

But it does not have to be this way.
We have a catostrophic stock and flow problems as a result of having amongest other things 1.8~ million private cars on the road.
A absurd number ….. but the banks gave out credit for this / produced a deposit.
This waste then payed the interest on the sov debt via the tax system.

It does not have to be this way.
We have enough resourses for rational capital growth if we dump the debt money system.

Let’s get back to those dodgy capital flows …

ECB Death Wish
Can the euro be saved? It’s not easy. I think of the euro problem as involving three layers: troubled banks, overlaid on troubled sovereign debt, overlaid on a deep problem of competitiveness created by runaway capital flows between 2000 and 2007. Saving the thing requires credible bank rescue, sufficient intervention in Spanish and Italian bonds to keep yields manageable, and high enough inflation in Germany that the south doesn’t face an impossible need for deflation.

@The Dork

Go and have a few pints o Beamish – you’re lookin a bit peeky and low on energy!

Twitter machine: @lindayueh says #Iceland sells ISK2.2bn of 10 year bonds at yield of 7.06%

@DOD/ @Seafoid

I knew the situation in Limerick was bad but those figures are even worse than I expected.
When I first started to work in Limerick in the mid seventies, most of the people in Ballynanty and Rathbane were working. Many had trades and the Corporation or Council were big employers at that time.

On a more general note, the situation and the mood of many the of the 80,000 underemployed will change significantly over the next month or so.
This is because of new rules being introduced by the Dept of Soc Welfare.
The ‘Three day week’ benefit will now be gone for those working three days. It will only be available to those working a two day week and will be calculated at 2/5 of the weekly payment as opposed to the current 3/6.

There are a lot of people involved. It will also precipitate a lot of tension in places of employment where a three day week has been a norm for dealing with temporary downturns.


re: Pensions Levy etc.
The €500 million annual dip into private sector pension was supposed to be for jobs programmes.
Perhaps Minister Bruton might advise on how he intends to spend this years €500 million! Even to a Minister €500 msu be a lot of money. It should be worth accounting for!

The Pension Board is somewhat of a sick joke.
They have presided over a regime that is now in tatters.
The PRSA’s pension that they promoted were at all times treated less equitably than other pension schemes from a tax viewpoint.
The so called ‘ legality’ under which many Waterford Crystal workers were effectively robbed of almost a lifetimes pension contribution is still in full force.

In fact no company employee should contribute one cent to any of these schemes until the law is changed.
In many cases they are merely contributing to the pensions of either retired workers senior executives who are close to retirement, who will take most of the fund with them.

The younger contributors will get nothing other than the pleasure of seeing senior retirees spending the contributions that those younger people struggled to put in, while they themselves get nothing.
It is just one of the many disgraceful / cute hoor quasi thefts that seem to be perfectly legal in Ireland.

Meantime the head of the Pensions Board does very nicely.

@ JR

Most of the factories that provided unskilled jobs to the people of Southill etc shut down in the 1980s and were not replaced. Ferenka was one of them. Dell pulled out a few years ago.

High unemployment in the most disadvantaged parts of Limerick is already hurting “respectable” Limerick. New investment isn’t making it to Limerick- it goes to Galway or Cork instead. It’s a vicious circle of social exclusion and economic failure.

@seafóid, Joseph Ryan

Course that €500 million on the Bill would assist in plugging the hole in the original €1.7 billion regeneration project that the FF/PD/gp pullled to pay off those unsecured bondholders?

Let’s go for €1.2 billion next time … and regenerate Limerick. The neuMayor is a prop of note, The Claw is available to lead the Emergency Maul, & The Blind Biddy Hedge Fund will supply the project management and the logistics.

off thread: V good update on German public opinion [and why does Herr Professor Sinn hate the Euro so much?

Germans Oppose Further Euro Crisis Bailouts

German Chancellor Angela Merkel is well known for her opposition to further aid for crisis-stricken euro countries without additional controls, but what do German voters think? A new SPIEGEL ONLINE survey reveals that a narrow majority is opposed to any more bailouts, and almost three-quarters of Germans want stricter fiscal oversight from Brussels.

The divide in the responses mirrors a current debate among top economists in Germany. This week, influential German economist Hans-Werner Sinn published an open letter, signed by around 170 economists, criticizing the resolutions agreed upon at the most recent European Union summit and claiming that Merkel was “forced into” agreement at the meeting. Other leading economists, including Peter Bofinger, a member of the German Council of Economic Experts that advises the German government, have reacted by attacking the letter and defending Merkel’s policies.

Well worth reading ….

… same story and Sinn’s wrecking ball

Economists do battle over Merkel’s policy
6 July 2012 Presseurop Der Spiegel, Handelsblatt

The first salvo was fired by the highly influential President of the Ifo Institute of Economic Research in Munich, Hans-Werner Sinn. According to Spiegel-Online, Sinn, who is convinced that bailing out European countries in difficulty is against Germany’s interests, has organised a petition signed by 170 economists who urge their “fellow citizens” and the country’s parliament to put a stop to a “dangerous” policy and avoid a banking union.

Economists close to Germany’s employers and unions were quick to respond, arguing that their colleagues petition was both “dangerous” and unfounded. In particular, they insist on one point in their defence of the Chancellor’s policy: the European Stability Mechanism (ESM), which is set to come on-stream this month, will not directly finance crisis-stricken banks until the appropriate European supervisory authorities have been established.


“Eurozone leaders last week agreed, subject to certain conditions, to allow the new rescue fund to take direct equity stakes in banks in a bid to break what they described as the “vicious circle” of dependence between weak banks and heavily-indebted sovereigns.

Clarifying that agreement, the senior EU official said that the purpose of the agreement was to prevent an increase in the national debt of countries requesting aid to recapitalize their banks, but that those countries would be expected to guarantee the ESM against losses on equity stakes taken.

“The ESM is able, if one ever were to decide on such a programme, to take an equity share in a bank, but only against a full guarantee by the sovereign concerned,” the official said. He explained that this would eliminate the direct impact on the government’s debt-GDP ratio, since the aid would no longer be in the form of debt. However, the ESM investment still “remains the risk of the sovereign because you have this country guarantee,” he said.”

Maybe Ursula could be volunteered to tell Enda. It seems that Article 20 is being defended and that much of the triumphalism after the summit has unravelled. Who could have guessed?

Methinks that Anonymous EU Official is a student of Herr Professor Sinn … someone is bouncing a Big Ball …

It was totally predictable that there would be backsliding by parties when they went home, it shows the ineptitude of political leadership in the core. The crisis will accelerate through Spain, Italy , Belgium to Ftance, The odds on the collapse of the EU not just the EZ must be over 50% now. For the third tome in a Century the lights in Europe are going out.


Not so much backsliding but an attempt to correct the queue jumping ahead of Monday’s meeting by underlining the sequencing of what has been agreed.

@ grumpy

Article 20 is not so much being avoided as a premature seeking of a legal opinion on it; from where being the question as the legal appeal arrangements for the ESM are rather idiosyncratic. The German constitutional court will be first up.

The Finns are setting the tone. They have been through a financial crisis and have come through it without outside assistance.

For the future, collateral is IMHO the word to watch. Even a state guarantee will not be enough for Finland. If other countries – notably Germany – want to accept it for wider reasons of realpolitik, that will be up to them.

Yet again these idiots have turned a victory if sorts into another defeat. Bond markets will delete “comtingent'” and put the bank bailout costs x 2 on Spain’s balance sheet. Spain requires a programme then.
Italy appears to have been thrown to the wolves now. Despite Momti best efforts he has got no support to push BTPs down.

@DOCM/ Grumpy

re Link
“Governments would be expected to guarantee the European Stability Mechanism against losses for direct equity stakes taken in national banking sectors, a senior EU official said on Friday. ”

Dreadful stuff. That is exactly the opposite of what the summit communique said and the opposite of the very first stated objective of the summit.
EU official or EC official?
If EC official then IMHO, Barroso should be fired if that is possible.
Of course it could just be spinning. No doubt there are several German officials who are also “EU” officials.
Such backsliding does not auger well.

Go East young men and women – Go East …

London School of Economics professor Danny Quah has calculated that the world’s economic centre of gravity – the average location of economic activity by GDP – is on the move. By 2050, the steady rise of emerging economies in Asia will have pushed the theoretical centre of gravity modelled by Professor Quah from its location in 1980 in the Atlantic Ocean to somewhere between China and India by 2050. He predicts that political infl uence will follow a similar trajectory eastwards.

Mick Clifford in fine form …

MICHAEL Noonan made an extraordinary admission in the Dáil on Thursday.

“We cannot believe the banks,” he said. “We cannot believe what they say.”

Here was the second most powerful democratically elected politician in the State effectively throwing his hat at the honesty of bankers. Implicit in his admission was the idea that he can’t do anything about it, that he, or the State, was incapable of dealing with a powerful group which can act with impunity.

Do bankers really rule the world? Listen to Mario Draghi, the head of the European Central Bank and a former honcho in Goldman Sachs. In an interview with the Wall Street Journal last February, Draghi said that “the European social model is already gone”. He pointed out that there would be “no escape” from tough austerity measures in indebted European states. This banker, rather than an elected representative, was telling the citizens of Europe how they must live.

The Conflationist Fallacy must be burst asunder …

The best way to take the bankers out of the game is not to borrow any money from them. But living within means is not core to the so called European Social Democrat model. Much better to stuff future generations with debt.
Government main problem is that it believed too many people over the years. MN new found scepticism is welcome. I hope it extends to showing the door to every interest group over the next year.

@ David O’Donnell

Since Thursday a lively debate among economists in Germany is going on about the next steps the government should take or not take to solve the euro crisis.

Hans-Werner Sinn initiated this open letter (signed by 170 german economists),
“How many German economists does it take to change a banking union?”

Not all german economists share this viewpoint:
See here (alas, all in german):

@ David O’Donnell

Danny Quah, a Chinese Malaysian, headed West!

Good news from the FT on your heroine:

Two-thirds of Germans, or 66 per cent, are satisfied with the chancellor’s work, a leap of 8 points from June and Ms Merkel’s highest score since the first bailout of Greece, according to a poll published yesterday by the ARD public television network.

Omniously, she advised our Enda and the professor:

Ms Merkel has vigorously denied charges of going soft on conditions for aid and she told Mr Sinn and his colleagues to “have a good look” at what eurozone leaders “actually decided”.

regarding DoD’s link:

2 bits to focus on maybe.

“Now, a new survey conducted on behalf of SPIEGEL ONLINE shows that Germans are worried about the crisis and the response by the German government. Their main concern appears to be inflation, with 69 percent of respondents saying that the prospect of significant price increases was a serious concern for them. Only 30 percent said they were not worried, while 1 percent had no clear opinion on the matter.”

I think I am reasonably competent to form a view about inflation, but its only a view, and that’s after analysing this sort of stuff for quite a while. 69% of Germans are mainly clueless in reality about this – yet they hold a view. I think it is evidence of a failure of communication by opinion formers.


“On the question of the single currency and its survival, the majority — 54 percent — believes that Germany should not continue to fight to save the euro if it has to provide additional billions in aid. A sizeable minority (41 percent) disagrees, however, while 5 percent are undecided.

The survey revealed that this skepticism is shared by Germans of almost all political affiliations. Among respondents who support Angela Merkel’s conservative Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), 52 percent said it was almost pointless for Germany to continue fighting for the single currency, while 45 percent disagreed. The figures are similar among supporters of the opposition center-left Social Democratic party (54 percent versus 43 percent), which has generally supported Merkel in her efforts to fight the crisis.”

Fiscal union, Eurobonds and a more flexible ESM with an expense account at De La Rue are all functions of opinion polls like this.

@Michael Hennigan

Well, you are already near or at the future centre! Der Speigel Poll [linked above] also worth viewing … a surprising number are mis_informed … & Sinn vs Bofinger is where it is at … it must be Bofinger …

Your ol pal Brian Lucey discovers the ‘fallacy of conjugation’ …

Financial crisis is a crisis of neoliberalism gone mad – not of european social democracy : PDs were the local catalyst to the atavist in Fianna Fail.


Bury Banks or Banks will Bury Us.


Heavyweight internal deutsche are highly critical of Merkel on precisely the point of ‘communication’ – that she has failed to adequately explain the ‘how’ of the crisis and the key role of ‘deutsche capital flows’ in accelerating it in the dog years 2000-2007 ….. in other words – her ‘fiscal spin’ on the ‘feckless peripherary’ has now made it more difficult to make key EU political decisions that her spun citizenry will live with ….

Inflation! Word fail me …

Mite the bailout argument to Germany go as follows.
Merkel to German teacher or cop. “we should underwrite pay and conditions of Irish public sector workers who work short hours for more pay than you so & retire on better pensions”. Yeah that would work. Then if they are wobbly tell them about the Greeks.

Like the Lucey article. Highly paid public servant defend his T&Cs. Whoathunkit?

@ David O’Donnell

Handy nixers available for those over-worked economists!

Brian defends his own pay using official sham savings!

The fact that Howlin can leave rising pension costs out of claimed savings, tells its own story.

Public pay and pensions are only one aspect of having to face reality with the prospect of years of no real growth ahead.

Brian’s argument wouldn’t have been helped with inconvenient facts that not only is there a premium of public pay of more than 20% on Irish private sector pay, that premium also exists compared with public and private pay in Finland and Germany.

I also understand why the issue of private pensions wouldn’t be on Brian’s radar in the week when the folks on a special pension scheme stole almost a half billion from decimated private pensions.

I particularly like the emerging argument that we should not tackle PS (excess) pay & pensions as it cause a negative multiplier effect , ignoring of course that raising taxes on the lower paid private sector with presumably a higher marginal propensity to consume.


UPDATE 2-Direct ESM bank aid needs sovereign guarantee-official
Fri Jul 6, 2012 8:15pm IST

* Official says if ESM helps bank, sovereign must give guarantees

* Direct ESM lending avoids pushing up national debts

* However, guarantees may be dropped “in the very distant future”

BRUSSELS, July 6 (Reuters) – Any risks attached to financial assistance given directly to banks by the euro zone’s ESM permanent rescue fund would remain the responsibility of the country requesting it, a senior euro zone official said on Friday.
The official, speaking on condition of anonymity because of the sensitivity of the discussions, said that if the European Stability Mechanism were to take an equity stake in a bank it would only be “against full guarantee by the sovereign concerned”.

“There is some degree of mystification going on here … in the broader public who think that under current rules the ESM could all of a sudden end up owning Bankia with the full risk of Bankia on the balance sheet of the ESM,” he said, referring to the Spanish lender. “This is very much not the case.

“Does it still remain the risk of the sovereign or does it become the risk of the ESM? It remains the risk of the sovereign because you have the counter guarantee of the sovereign.”

He later signalled, however, that this may change once a new supervisory structure for banks were put in place.

“In the very distant future … if we have a single euro zone supervisor supervising all banks … if there were to be direct bank recapitalisation would this still require a counter guarantee of the sovereign, my understanding is that it would not,” he said.


@ Tull

The Lucey article fails to mention the word increment even once. Can only assume it was a clearical oversight.

@ Bond
Thanks for the clarification. That’s actually a fairly sustainable number.
So BOI -> ECB who print cash in exchange for those bills -> and BOI releases credit into the economy -> and growth could be >> than the interest repayments. This is a potentially good outcome

@ Tull
Agree – think USC targeted on public sector increase is better than tax increase. But must also be coupled with welfare reform. It all has to be carefully calibrated though.

All in all some hope

@david o’donnell

Interesting link to Mick Clifford’s piece.

@michael h

The Merkel-Monti summit by all accounts, now that a period of digestion as occurred, gave little succor to either direct purchase of bonds or unguaranteed financing of banks. It is hard to see how Ireland could reasonably expect a get out of jail card on bank debt, if Spain and Italy don’t also benefit.

Big question is whether Spain and Italy might join forces and threaten a continental sized default. For sure, few Italian politicians will wish to be seen prolonging Monti’s austerity.

Just back from a haunt called the Pavilion on Bukit Bintang and I remembered that the Toronto Globe and Mail had reported in 2010 that Brian Lucey’s wife was a teacher who like himself had to take a paycut from levels built on froth.

I don’t go out of my way to create enemies and I have two brothers who are teachers married to teachers.

One of them in particular with a sense of entitlement sees himself a victim with having to endure ‘unnecessary’ cutbacks (well when the Irish government allows a highly profitable Swedish company to wind up its Irish pension scheme and arbitrarily cuts benefits for people like myself, then wonder about the selective protection of citizens) and in that crazy year 2006, he used to pester me on whether he should sell a second house he had bought some years before, in case the tide would recede. At that time, the Dept of Social Protection was paying him rent for a Nigerian family.

From the other side of the tracks, one year after the dot-com bust, I took my son to the post-Christmas sales to buy a pair of runners and we went to a number of places including Arnotts but the ones he wanted weren’t on sale.

It’s tough for people to explain to kids about a recession in an age of conspicuous consumption.

Double-income folk with State guarantees of employment and pensions for life will never understand what it is like to fear running out of money in the modern economy.

However, strangely or not, the people in the tradeable sectors of the economy who are needed to sustain the rest, generally have the worst conditions — failing or no ocupational pensions – – and some face permanent unemployment.

Ireland is neither a fair or just society — bitter truths of course are seldom welcome.

Brian Lucey makes the usual point that knocks over the straw man who says:

“public sector wages should be reduced by an amount equal to the primary deficit, simples innit!”

I’m sure you can find people who take this view if you search for them – perhaps RTE will line some up in an audience so they can be swatted away by a Croke Park championing expert guest.

He makes a point about private sector wages effectively being reduced via headcount mainly, rather than wages. The way this works is that workers who are employed in areas that are over-staffed are made redundant.

Thanks to the excellent Croke Park Agreement, management cannot do this in the public sector – the workers have picked who should be made redundant or take expensive early retirement. For this reason, the narrow comparison with private sector wage reductions is flawed.

There is a large hospital in Dublin where both the phlebotomists took early retirement earlier this year (why wouldn’t they given the generous deal?). It was entirely up to them. Since they cannot be replaced by management, an ’emergency’ attendance for that service has been changed from ‘walk in’ to having required an appointment for several weeks time.

Meanwhile administrative staff with no training for or experience of working as medical secretaries are being ‘re-deployed’ as such. Can you imagine the efficiency gains!

Unless you think that Ireland’s economic model has just had a temporary, entirely bank debt related blip, and that (as foreigners view it) stealing FDI business form its neighbours and European ‘partners’ and using there resulting superior economic performance to sustain superior pay, pensions and terms of employment for its public sector and sheltered private sectors is the mean to which the ecomony is currently returning to, then to look no further than multiplier effects on public sector wage cuts seems parochial and a little lacking in imagination.

Those who don’t sign up to the above scenario are expecting Ireland’s future to be secured through a fiscal union or transfer union. This is politics politics politics – with a dash of economics. The German’s and other core Europeans aren’t stupid. They are unlikely to sanction economic / fiscal / transfer / liability union with Irish public sector costs, wages, pensions etc so much superior to their own. Threatening them with a negative multiplier effect in Ireland won’t cut the mustard.

@ grumpy

The answer to the conundrum that you pose is so simple that it seems almost absurd. The distinction bettwen the 90% of the public sector and the private with regard to conditions of employment has to be abolished. One might describe it as the Scandinavian solution and it is grounded in the concept of “equal treatment for equal conditions”.

It may be forced upon us by the parlous state of the national finances. It would be the luckiest break we ever had.

@ Joseph Ryan

If the situation is viewed as a game of inter-EA political “pass the parcel”, the developments over the past days are easily explainable. The budget introduced by the new French government demonstrates that the idea of a fiscal union is a pipe-dream. The “choices of society”, as the French describe them, are a national prerogativen. In a monetary union, all that matters is that each society keeps control of the national cheque book and does not splurge on the credit card at the expense of other members of the club.

Unfortunately, these simple rules have not been observed and the political question is; who is responsible for financial result? Finland – and certainly Germany – would argue that they have already paid their part of the bill by guaranteeing that it will – eventually – be paid.

As to the arguments advanced by Brian Lucey et al, what can one say? They are living on borrowed time financed by borrowed money.

An alternative take to that of Brian L, also from the Examiner – nice reference to Spain too:

“COUNTING the cost of local government usually takes the form of berating the excessive numbers of councillors and the expenses they incur.

However, the less-looked-at reality is that city and county councils are top heavy with senior public servants who are earning huge amounts with increments built in every year until they get to the top of their hefty pay packets.

In Dec 2009, “emergency financial measures in the public interest” were implemented to cut the pay of all civil servants — including local authority workers — around the country.

They ranged from 5% on the first €30,000 to 10% on the next 55% resulting in reductions from 5% to 8% on salaries up to €125,000.

Less than a year later, the Croke Park deal was signed preventing any further pay cuts.

With householders now being forced to pay €100 towards local government, there will no doubt be anger to see how the top brass within each county is paid, and just how many of them there are.

An analysis of wages reveals most local authorities have at least five people earning over €90,000 and by the time workers reach the top of their pay grade, many councils will have, or already have, several earning over €100,000.

In Dublin City Council and Cork City Council, all of the top 10 posts receive over €100,000. In Cork County Council, 15 personnel will earn €100,000 when they reach the top of their pay grades.

Indeed a report on local government reform, by the local government efficiency review group, commissioned by John Gormley two years ago stated: “A separate independent exercise is needed to review overall staffing levels, and numbers at management level, in both Dublin and Cork city councils. Both local authorities have high levels of staffing per capita, as well as large numbers of staff at senior management level.”

Astonishingly, the Dublin city librarian earns more than the prime minister of Spain at €106,900 (the top of pay scale). Spain’s prime minister receives an annual salary of about €92,000, so in fact it’s not just the head librarian who earns more than him, but many of those working in top local authority positions.”


re the Brian Lucey article:

“Will we have to reduce the overall public sector pay bill? We will. Will this best be achieved by cutting nominal wage levels? Highly unlikely..”

Terrible. Surely he is not suggesting that more people will be let go and services reduced while the remainder continue to enjoy their privileged status.
Is that economics or just plain sinnfeinery?

“But where? 60% of wages are paid to those earning less than €55k, 25% to those earning less than €35k. Meaningful cuts, say €3bn per annum, cannot realistically be done if we wish to exclude the lower paid from same. ”

Therefore 40% of PS earn more than €55,000pa plus of course related pension etc. Any reason that a bankrupt country cannot start to reduce the remuneration of that 40%?

We are back to the age old tactic, successfully practised by the IFA over the years, of using the faux concern for lower income groups to shelter the high earners.

Joe Durkan is the only economist that I am aware of who has publicly said that many PS were overpaid. I believe his estimate in relation to his own remuneration was about 25%. [This was on a Vincent Browne show a few years ago.]

@Joseph R

“Joe Durkan is the only economist that I am aware of who has publicly said that many PS were overpaid. I believe his estimate in relation to his own remuneration was about 25%. [This was on a Vincent Browne show a few years ago.]”

Joe actually does this regularly. He deserves great credit for his honesty and willingness to be unpopular with peers for doing so.

You are wrong though about him being the only one. Many have actually said something a bit like this, but usually once and not terribly publicly, but importantly, somewhere on the record so assertions like yours are technically inaccurate.


Point taken. But you will have noted my qualification -“the only economist that I am aware of “.

@ grumpy

“Technically inaccurate”?

From Shakespeare’s The Merchant of Venice, 1596:

LAUNCELOT: Nay, indeed, if you had your eyes, you might fail of
the knowing me: it is a wise father that knows his
own child. Well, old man, I will tell you news of
your son: give me your blessing: truth will come
to light; murder cannot be hid long; a man’s son
may, but at the length truth will out.

@ DoD

“By 2050, the steady rise of emerging economies in Asia will have pushed the theoretical centre of gravity modelled by Professor Quah from its location in 1980 in the Atlantic Ocean to somewhere between China and India by 2050. ”

I thought the markets had given up on India. China is looking at a drop off in numbers joining the workforce within a decade as the one child policy kicks in. Projecting to 2050 is a real thumb suck.

In a culture where the attitude of grabbing as much as can be got away with from the public treasury, is strong, the beneficiaries of the Republic of Ballymagash’s gravy train, are the ones tasked with doing the pruning or avoiding it.

The Institute of Public Administration reported in its ‘Public Sector Trends 2011’ on public service pay:

On average, top managers compensation in the UK and Ireland in 2009 was 7.7 times that of administrative staff (secretaries) whereas for the Nordic countries top managers compensation was 3.5 times that of secretaries. Similarly middle managers compensation was 4.2 times that of secretaries in the UK and Ireland whereas it was 2.2 times greater in the Nordic countries. The Nordic countries have a much flatter compensation structure (particularly Finland and Sweden), whereas the UK and Ireland have opted for higher compensation at the higher levels.

Trust in parliament (Ireland) displays a similar pattern to trust in government, dropping to an all time low of 12 per cent in 2010 and recovering to 39 per cent in 2011, above the EU27 average but still some way below the EU15 average. The Nordic countries of Sweden, Denmark and Finland display the highest levels of trust in their national parliaments.

€1.5bn to pay for some 800 allowances in addition to regular pay annually and the top people can so easily seize almost €500m annually from private pension funds.

Public pay and pensions are just one part of a black hole vortex and the fools may believe that by 2015, everything will be fine.

Last year the Department of Social Protection disclosed that it was paying GPs and other doctors almost €500,000 a week to sign medical certificates for workers claiming illness benefit payments.  Last month, a Sunday Times journalist was able to obtain a sick cert from seven out of 10 GPs she visited, in spite of telling them she wasn’t ill and simply wanted a day off to attend a wedding.

Ah shur, what’s another €23m to worry about?

GP fees have outpaced inflation since 2000 and all through the recession. According to the Competition Authority: ‘Overall, doctors’ fees (which include all doctors’ fees, in both primary and secondary care) have been rising almost three times as fast as the general level of inflation in the economy.’

Nevertheless, a Mayo GP wrote plaintively in The Irish Medical Times this year:

‘Currently, GPs have a contract that ensures 24-hour care 365 days of the year for medical card holders. The average payment per person in the medical card scheme to a doctor is €284.92 per year (PCRS report 2010). Divide that figure by 365 to get the average payment per day (78 cent/day) and by 24 to get the average payment per hour (3 cent/hour) per person. What value for money is that!’

Talk about living in Nephelokokkugia!

Meanwhile, ‘phone a crony’ operates in the civil service to give a top-up to retirees, while some positions could be filled by former managers with a record of achievement who are on the dole.

@ seafóid

China will adjust its 1980 one-child policy.

The government has collected over 2tn yuan (US$314bn) in fines since 1980 in respect to extra births. Failure to pay means the second “black” child cannot obtain a household-registration document, or ‘hukou’, which brings with it basic rights such as education.

By 2030, China alone will account for 30% of the world’s new college-educated workers, according to McKinsey. In comparison, the United States will account for only 5%, and collectively, advanced countries including the US, Japan and much of Europe will account for only 14% of new highly educated workers.

“Investments in education that China made much earlier are now paying off,” said Anu Madgavkar, a senior fellow for the McKinsey Global Institute. “China invested in opening a lot of schools and they ramped up college enrollment.”

China is also producing far more science, technology, engineering and mathematics grads, giving it a leg up in some of the world’s fastest growing sectors.

In 2008, only 14% of US graduates earned degrees in those specialties, whereas 42% of China’s college grads did so.

Madgavkar’s calculations predict that Chinese employers will need 140m college-educated workers in 2020, about 23m more than the country will be able to supply.

@ All

On the issue of abolishing the unnecessary distinction between employment conditions in the public and private sector – which is one of the two core issues – the universities would be a very good place to start. cf. interview with Provost of Trinity.

The other core issue is that adverted to in the article by Stephen Collins linked to above.

He comments;

“Public sector pay and pensions ballooned out of control in the first decade of the 21st century precisely because the salaries of senior officials and politicians were irrevocably linked in the late 1990s. Both groups became detached from the reality that applied to the rest of society”.


There is a huge disjunction between the perception of equity that might be conveyed by major cuts in top-level public sector pay and privileges – so as to persuade those down the ranks to accept further sacrifices – and its effectiveness. Its effectiveness may be questioned on two counts. First the amount of money saved is likely to be small in relation to the fiscal gap that has to be closed. And secondly, and much more importantly, the resistance to pay cuts across the board, whether they are encouraged, justified or whatever by initial pay cuts at the top level, will prove almost impossible to overcome while the cost of living in Ireland remains around 15% higher than the Euro Area average. It is this which determines the fierce resistance to cuts in pay levels that might be viewed, externally and objectively, as being excessively high.

Any successful policy implementation requires careful sequencing. First cut the costs, then examine the balance between cutting pay and increasing productivity to justify existing levels of pay. And most of the excessive costs that remain are almost entirely within the direct of indirect control of government.

It is a measure of the extent to which government has been captured by narrow sectional economic interests that no effective downward pressure has been, is being or will be exerted on these unjustified and excessive costs.


Employment rights and legal protections in developed countries, have moved on from the UK civil service guarantee that was part of reforms in the post the Crimean War period when the typical worker was little better than a slave. Dare one also ask if a permanent position in a university is sufficient without the old- fashioned crutch of tenure? Of course, those who have it, would always defend it.

If Elaine Byrne still works at Trinity — she should have reported that. Conflict of interest is generally a strange concept in Ireland.

Prendergast criticises Minister Quinn and political diktats but there is no mention of a mismanaged pension fund with a deficit of €375m, that became the direct responsibility of Joe Plonker Taxpayer in 2009.

The generosity with extra pension years became a ‘legitimate expectation’ Trinity told the Comptroller & Auditor General in 2009.

What was the value of a ‘legitimate expectation’ to jobs for the tens of thousands of victims of this recession?

As for the statement, the ‘budget is about €300m; the State grant is only €66m of that,’ this is surely misleading.

Who funds science related activities? Thanks again Joe Plonker Taxpayer!

@ MH and Paul Hunt

RTE (MF Show – with the participation of Stephen Kinsella – and Week at One) have, as you are probably aware, been running with this general topic all morning, no doubt in response to the avalanche of press comment elsewhere. It is dispiriting to see a continued focus on the symptoms – shock horror on this or that allowance etc. – and not the two core issues that I have identified.

On the first, I agree that a major part of the problem is the historical heritage from British practice. But the problem is also endemic elsewhere. What is unique about Ireland’s circumstances is the fact that the country has, for the firts time in its history, run out of money and this presents us, in my view, with an unique opportunity.

We have to decide where the public service starts and finishes. Does it include the universities? Sweden, with twice our population, can manage with a core service of under 5,000 officials and there is a clear division of responsibility between the political and the official level.

The second core issue – the “irrevocable” link as Stephen Collins describes it – between pay levels for public representatives and public servants – two entirely different animals – is one of the main – if not the main – stumbling block and the reason for the lack of any movement.

But the real debate has hardly even started. I am still very hopeful not so much because of the problem with the current budget deficit but the overhang of unfunded pension commitments and the need to come up with a more equitable system of social protection. It is also clear that the infamous CPA is being steadily undermined by the suffocating waffle quotient associated with its defenders.

The runaway monster that is the Irish health service may prove to be the catalyst.

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