Categories Uncategorized EU-IMF Programme of Financial Support for Ireland 20th August Post author By Philip Lane Post date August 24, 2012 41 Comments on EU-IMF Programme of Financial Support for Ireland 20th August The latest version is here. Related ← Derek Scally’s Interview with Wolfgang Schäuble → A couple of economic history links 41 replies on “EU-IMF Programme of Financial Support for Ireland 20th August” As there does not appear to be much appetite for discussing the harsh realities of Ireland being “in receivership”, as Ruairi Quinn accurately described it, the other topic of the weekend is worth mentioning viz. the report in Der Spiegel on Merkel’s reported desire for a new EU treaty before the end of the year (!). http://news.google.ie/news/story?ncl=dURUwpavH3s0UOMYhQNk8fA6nNCtM&ned=de&topic=h And a new book on the lady herself is reviewed by the Economist. http://www.economist.com/node/21560910 http://www.independent.ie/national-news/tax-increases-and-benefit-cuts-on-way-to-satisfy-euimf-3209786.html Tax increases and benefit cuts on way to satisfy EU-IMF I think the economics crowd needs to get the finger out on this and explain what is happening Page 10: Objective “Increasing the fraction of vacancies filled off the live register” Of the total recruited directly into the PS (incl teachers), how many were off the live register and of the total what was the proportion of retirees from the PS? Is that section just for people who pass through the DSP (Dept of Scoial Protection)? Nice little earners for the old boys and and girls network is surely exempted from such a proletarian screening program. @ DOCM “Mrs Merkel’s best power tool is the euro crisis” I have been thinking this for some time now. The Euro is the tool that is being used to pulverise countries but ultimately the Euro too will be cast aside by Merkel if it becomes an impediment to her staying in power. Indo leads with the property tax. This will be fun – oh what a tangled web…. Wont this depress the property market just that little bit more? 2013 will be some year! Eureka, How do you expect the deficit to be cut w/ out taxes & spending cuts.? This year is when the rubber meets the road, property tax, welfare cuts and a reduction in credits, I would advocate more cuts in wages and transfers and the liquidation of useless and inefficient quangos. Start with CIE Eureka, How do you expect the deficit to be cut w/ out taxes & spending cuts.? This year is when the rubber meets the road, property tax, welfare cuts and a reduction in credits, I would advocate more cuts in wages and transfers and the liquidation of useless and inefficient quangos. Start with CIE A significant figure included is the figure for gross voted expenditure 2013 @ €54 billion ( current + capital) which compares with €55.85 billion per estimates for 2012, a 3.3% targeted reduction. If applied to the Dept of Social Protection budget, it would be down by €675 million, i.e. from a gross of €20.55 billion in 2012 to €19.88 billion in 2013. On rechecking, I find the figure for gross voted expenditure 2013 per the Medium Term Fiscal Statement, November 2011, is €53.775 billion. So the €54 billion figure included in the latest EU-IMF Programme of Financial Support represents an old-fashioned ‘slippage’ of €225 million, possibly justified by new upwards-revised GDP 2013 estimates – recently increased from €164 billion to €168 billion. @ Tull A tax on schadenfreude maybe? @ Robert Browne The French business paper “Les Echos” has a short but perceptive take on the latest institutional move by Merkel. (Google Translate gives a pretty accurate rendition). http://www.lesechos.fr/economie-politique/monde/actu/0202230809499-merkel-desire-aller-plus-loin-dans-l-union-politique-europeenne-355753.php It is a classic but by now rather tired manoeuvre which casts her in the role of leader trying to bring recalcitrants along (which is especially useful ahead of the 2013 federal elections). It also keeps up the pressure on Hollande to do something about the state of the French economy and budget. On the Economist article, the rest of the paragraph from which you quote is more relevant, it seems to me. “As in the former East Germany, she remains unreadable in summitry, waiting until a response becomes inevitable, then presenting it as “alternative-less” (one of her favourite words), whether it circumvents the German parliament or not.” She has no historic appreciation of the “European project”. But then, neither did Schroeder. Like many others, I casually follow the global financial press (particularly in the USA). One positive outcome from Ireland’s harsh austerity and reform path over the last four years has been the slow dropping of Ireland down “the list” of countries with bad economic reputations. For example, today in the New York Times there is an editorial which refers to the PIGS – Portugal, Italy, Greece and Spain. I do not approve of that acronym (it feeds on stereotypes) but it is a reputational improvement when Ireland is not included in it. I note that under Financial Sector Reforms, Ireland is still being pushed to deleverage banks, and the banks are doing just that by not lending and squeezing debtors. Apart from being economically suicidal, it seems to run directly contrary to the provision of LTRO by the ECB. LTRO not only provides liquidity but it also allows banks to postpone deleveraging. One has to question this ‘deleveraging’ element of the TROIKA program and wonder why the government has not put up more resistance to it. IMHO, deleveraging has been far more damaging to the economy that the austerity implemented to date. @ Gregory Connor I have seen people using the acronym GIPSI which is even worse @Seafoid Ireland can ruin the use of GIPSI by dropping off these lists, after lots of more hard work. @DOCM “As there does not appear to be much appetite for discussing the harsh realities of Ireland being “in receivership”, as Ruairi Quinn accurately described it…” Its not quite as bad as the household budget/fiscal budget analogy but it is not accurate reflection of our current situation. Ireland have options that companies in receivership do not have not least the option that if we do not get substantial easing on banking debt we can extricate ourselves from the failed single currency experiment. Our politicians do not have the courage present any case other than the lazy narrative as outlined by Quinn. In this regard it is refreshing to see some academics like CMcC finally getting a little more bullish where we should be taking a stand and the practical, moral and legal justification for the same. Btw…has Dork been shut down/censored completely or is he busy actively lobbying for a new Birr to Kiltimagh railway? @V Barrett I never fully understood what the Dork of Cork was on about but I know many other readers liked him and clicked with his style. Speaking for myself I never censored anything he wrote — he was never obscene or impolite just poetical and obscure for a mainstream economist to follow. I think the same holds for the other monitors — no reason to censor him even if you do not know exactly what he means to say as long as it is inoffensive, etc. He is probably busy with other projects. The irisheconomy.ie project is a group effort with contributors coming and going with the wax/wane of other calls to duty. Page 12 contains the meat for the Fiscal Consolidation efforts under Budget 2013, including the 2.25 bn expediture reduction. They have it set out with social expend. reductions on top, implying that is the largest consolidation area. But clearly, a substantial amount must come from pay and pensions, bullet number two. How to square this politically with the Croke Park Agreement? @Chris Chan a lot of people retired last year and got lump sums and the like, few will retire this year, so a significant reduction in pay is likely within the CPA. @The Dork form Cork Blind Biddy says Hi! @all FYI 08/27/2012 The Bundesbank against the World German Central Bank Opposes Euro Strategy By Christian Reiermann, Michael Sauga and Anne Seith The European Central Bank plans to resume buying the bonds of crisis-hit countries on a large scale. Jens Weidmann, head of the German central bank, is firmly opposed to the idea, arguing that it will lead to inflation and lessen pressure on governments to carry out reforms. But he is becoming increasingly isolated within the ECB and in the political world. http://www.spiegel.de/international/europe/german-bundesbank-opposes-euro-crisis-strategy-a-852237.html Jens is becoming as popular as LBS around here! Has he been to Harvard? @DOD Bond buying by the ECB: Der Spiegel “The consequences can be fatal. With its bond purchases, the ECB is flooding the markets with money.” Fatal is a Spanish unemployment rate of ~25%. Personally I think Dragi is moving towards an mechansim for bonds, a bond snake, with the ECB controlling / keeping the bond yields within the snake parameters. “Volker Bouffier has always portrayed himself as the last true conservative in Germany’s center-right Christian Democratic Union (CDU). Bouffier is the governor of Hesse,…………….. But on Monday of last week, Bouffier seemed to be a changed man. He had invited Jens Weidmann, 44, president of the German central bank, the Bundesbank, to a meeting at the Hesse state chancellery.” Always interesting to see how ‘archconservatives’ can change their tune, when their insane policies start to have an adverse effect on the own pockets and interests. @ All A bit off topic but of great interest[ the opinion piece in the FT by Daniel Gros and Thomas Mayer suggesting the creation by Germany of a sovereign wealth fund. http://www.ft.com/intl/cms/s/0/05b1a044-ed2f-11e1-83d1-00144feab49a.html#axzz24g06Umyp Of course, it accepts as a fact of life Germany’s 6% surplus and the mercantilist approach that underpins it. While unlikely to be accepted, the idea has the merit of identifying the problem, the core element of which is the major and widening imbalance between the two major economies in the EA, Germany and France. The setting up by Schaeuble and his opposite number Moscovici of a coordination mechanism is a positive sign of an emerging public recognition of this. @ Dearg Doom, Thanks for the reply, but I remain sceptical. Most of the gains from voluntary retirement in terms of the wage bill have already been realised. The forecasts for the last EU review http://ec.europa.eu/economy_finance/publications/occasional_paper/2012/op96_en.htm put current expenditure on a (slight) upwards path for 2013 (page 27), which is a lot more realistic, particularly as nothing has been done on increments. Can’t really see where they are going to find 2 bn and change without either breaching the CPA or going to town on social welfare & pensions… CHris, Plenty of fat to trim. Today’s nugget. Dun Laoghaire Harbour Company with 27 staff has a CEO paid more than each of the 4 Dublin County Managers. It is 180k per year. The port seems to have only one ferry sailing per day. @ Tull there are loads of people walking the piers though. And a fellow playing the banjo at the end of one of them @Seafoid Bet the guy with the banjo gets cut before the the CEO. Croke Park and all that, contracts must be honoured, extraordinary level of commitment, worked hard to get where he got, etc, etc, etc. We simply cannot afford to pay guys lazing around playing banjos all day, even in Dun Laoghaire. Interlude: Die Nederlandz 08/28/2012 Dutch Discontent Socialists Ride Wave of Anti-EU Sentiment By Christoph Pauly in Rotterdam The economy is in trouble and unemployment is rising — in the Netherlands as in much of the rest of Europe. Ahead of upcoming elections, the Socialists are riding a wave of euro-skepticism and may emerge as the strongest political force in the country. http://www.spiegel.de/international/europe/left-wing-socialists-are-favorites-in-upcoming-dutch-election-a-852352.html @Dutch Socoalists Appreciate that ‘vote’ on the odius Irish Debt pile to be fiterered intotal to bust banks while the serfs were to be screwed to make up the difference. That said, appreciate the vote which prevented a real f*ck up in Dutch/Irish relations. JR, the guy with the banjo is self employed and has suffered a drastic fall in his living standards during the recession. He has probably laid off the lads with the tin whistle and the bodhran. They might even be competing with him now for what little business remains. Anyhow, I will try not to complain about this insider-outsider labour market. I am off to figure out a means of inserting my snout and front trotters into “the trock”. Debate Our true European community 28 August 2012 Frankfurter Allgemeine Zeitung Frankfurt Fiscal union in order to complete the single currency is the only way out of the crisis, says German writer Martin Walser. But it is important to remember that the true Europe has always been a community of learning, which respects the various cultures that make it up. …Only those that hope that the European Union will also be a monetary union get my vote. The euro is here. It is more than a currency. Today, for a country to return to the age of national currencies, to become, once again, the plaything of every speculator, is a nightmare scenario. …Literature has always been European A 1799 letter by Friedrich Hölderlin reads: “But the best of the Germans continue to think that everything would be for the best if only this world were neatly symmetrical. Oh Greece, with your geniality and your piety, where to have you come?” If I quote this passage, it is not because Greece is today manhandled within the eurozone, but because it shows how much a poet from Nürtingen [southern Germany], aged 24 at the time, felt close to other European countries, to the point that this foreign place was his homeland; to the point that it was part of his conscience; of his identity. In other words, literature has always been European. Europe is our literary homeland. Nietzsche’s Greek soul As for Nietzsche, he ends The Birth of Tragedy From the Spirit of Music, a wild and precocious work in which he described the never-ending struggle between followers of Apollo and those of Dionysus, – a book on Greece, no more no less – in the following way: “How much these people must have suffered in order to be able to become so beautiful!” http://www.presseurop.eu/en/content/article/2595421-our-true-european-community Well, I for one remain a fan of Jens Weidman. Europe’s currency is a failure, and its politicans are unwilling/unable to take the necessary steps to fix it, or to accept the consequences of not taking such steps. “Let’s print money”, they say – it will buy us time and allow us to create a fix later. Buying time for politicans has never helped fix anything. Jen Weidman is an unpopular man for pointing that out. Other central bankers would not dare – but the Bundesbank has alwyas steadfastly indepedent. It’s a different tradition that non-Germans have difficulty understanding. Suggesting to a German that the Bundesbank should print money to help fix the economy, is a bit like suggesting to an Irish person that the courts should suspend habeas corpus to help fix crime. @Sceptical01. If Jens is so concerned about the inflationary effect of the ECB buying bonds, why does he not get Germany to sell bonds or the BUBU to seel its German bonds until the bund rate rises to say ~2%. The money from the sale can then be lodged in the ECB to sterilise the effect of the ECB bond buying? No. I don’t think Germany will. Much better to have zero borrowing costs and continue to lecture people about solutions that do not work. Its called having your cake and eating it. @Tullmcadoo “Anyhow, I will try not to complain about this insider-outsider labour market.” One could say the private sector has been ‘Targeted’. PS: The revenue are supposed to rank pari-passu with employee wages etc in the event of receivership/ liquidation. Yet, one week from closure, the revenue gets €200000, the employees get no wages. A power of attachment is a wonderful thing, in the hands of the State. It looks like the Target employees get to see Croke Park on Saorview only. @ Tull (and other gents of a humorous persuasion) Right, all jokes about banjo players aside. The Croke Park agreement explicitly says that we cannot look for compulsory redundancies or cut wages – this also applies to semi-states such as Dun Laoighaire. So this is all to my original point. If the 2.25 bn number in Friday’s doc is to be believed, is the govt preparing a breach in the Croke Park agreement? And if so, would reform of the increments system not be a better place to start, rather than outright sackings and wage cuts? @Joseph Ryan I’m glad you appreciate the consternation that arises when people suspect that a central bank is trying to engineer lower rates in order to make life easier for government politicians. Especially in the eurozone where suspicions of national favoritism are so easily triggered. @ All FYI http://www.cso.ie/en/media/csoie/releasespublications/documents/earnings/2012/earnlabcosts_q22012.pdf The CSO figures confirm two rather undeniable phenomena at this stage (i) “austerity” in terms of earnings for those in employment is a relative term and particularly for those employed in the public sector who enjoy a level of weekly income way above those in the private sector. The figures can be parsed but not to the extent to call into question these two conclusions. One wonders what SIPTU has to say about it! JR. Something in Target does not add up. Interesting to hear FF & SF jumping on the populistic bandwagon in calling on politicians to intervene in the operations of the Revenue. One party has learnt nothing and the other Knows nothing. @DOCM Quelle suprise! The PS not only ahead ~50% but went ahead further ny 3.3% in the past 12 month. How austere is than! Public policy is to coddle the PS and to crucify the private sector. @Tulmcadoo. re Target. Yes, something is not quite right, but spinning is everything. The fact is that Revenue used a mechanism to prefer themselves as creditors and jumped the queue, in a company about to close. There are a lot of legal issues at play, some of which have probably not been tested. The employees would certainly appear to have grounds for legal action, if any of them could afford it. Against whom? PS. The company has ceased to trade. There is, astonishingly, no legal obligation on directors of a company to put a company into liquidation. They can simply cease to trade and to use that famous phrase’ park it’. Amazing, but that is the case. PPS: The Director of the ODCE was lauded all the way to his gilded chariot this week, after ten years of corporate enforcement. Enforcing what? It is only now we are learning that there were no laws to enforce! Where is the law that requires the directors of Target to put the company into liquidation. We have this all the time in the business in which I work. park it. Walk away. No problem. @chris chan “is the govt preparing a breach in the Croke Park agreement” Shouldn’t that read “planning to finally implement clause 1.28 of the Croke Park Agreement”? @ All A very powerful intervention by Draghi in the Die Zeit. The ECB has kindly provided an English translation. http://www.ecb.int/press/key/date/2012/html/sp120829.en.html I would subscribe to its contents in their entirety. It may be noted that Germany is not left of the hook with regard to the question of imbalances, although the issue is tackled indirectly. It may also be noted that Merkel is now quoted as saying that she is not looking for a convention as “this is not the point”. Her initiative is untimely and not meeting with the acquiescence typical of the Merkozy era when Sarkozy stuck to her skirts for fear of meeting something worse. This is also reflected in reported study that changing the method of voting in the ECB to one based on capital shares – related to GNP – would not greatly strengthen Germany’s position and would, in fact, make it weaker in terms of the alliance now forged against the blinkered policies of the Bundesbank. @ Joseph Ryan You must take into account the qualifications mentioned by the CSO. “It should be noted that earnings are gross amounts before deductions for PRSI, tax and other levies such as the pension levy in the public sector introduced in March 2009. Estimated averages do not reflect differences in characteristics of the job or the employees, and since EHECS collects aggregate data from each enterprise it is not possible to correct for such differences using EHECS data.” But the conclusion that the public sector is being “cosseted” relative to private sector employment cannot be denied. This does not, however, hold true for the services sector as we all know to our cost. FYI the approach of “D-day”. http://www.independent.ie/business/irish/dday-next-month-for-plans-to-cut-cost-of-our-bank-rescue-3213286.html This report seems more firmly anchored than the huffing and puffing with regard to “secret letters” and taking the ECB to the ECJ. @ All One line of debate worth pursuing would be the benefits, as opposed to the drawbacks, of being in a programme cf. http://www.independent.ie/business/personal-finance/property-mortgages/new-price-register-will-be-used-to-set-property-tax-bills-3214936.html The country is being dragged, kicking and screaming, out of the land of the nod and the wink into something approaching a modern western economy. Comments are closed.