CB QB4 2012

The Central Bank of Ireland today published Quarterly Bulletin 4 2012.

The 2012 Compendium of Irish Economic Statistics have also been published.

16 replies on “CB QB4 2012”

re: Forecast Summary Table:

Why is the ‘National debt’ not on the summary table, and the Debt/GDP level?

Surely these have more relevance to ‘Forecast Summary’, and our national predicament, that the price of a barrel of oil.

From the comment:
“”Banks are also continuing to adjust their balance sheets through deleveraging, with around two-thirds of the end-2013 PLAR target now having being achieved for the system as a whole. To guard against unintended consequences of deleveraging on the supply of credit or deposit pricing, the framework has been modified and will now also take account of banks’ overall liquidity positions and the funding of core operations.”

“unintended consequences of deleveraging”. What a neat phrase.

Is this code speak for the reality that bank deleveraging, mandated by the EZ and enthusiastically applied by the ICB, is in fact destroying the domestic economy, far more than all the austerity programmes put together.

“This is expected to be followed by a pickup in growth in 2013, to around 1.7 per cent in GDP terms and 0.7 per cent in GNP terms, based on some recovery in external demand next year, alongside a gradual stabilisation in the domestic economy.”

‘Some recovery in external demand’. Where is there any evidence of this, other than wishful thinking.
I would have thought that the letter from the ‘Helsinki Three’ will have scuppered any chance of recovery in Europe for some time to come.

Chart 7 on P 28 is quite interesting. Just roughly, it suggests that commercial property in Ireland has now had almost 3 years of falling at about 15% year/y since the Nov 2009 date at which assets were valued to be purchased from the banks by Nama.

Plenty of observers noted that commercial property (and therefore by implication loans secured on or for the development of such property) would very likely continue to fall significantly in value. The official line was that this was alarmist and there must be “no fire sales”.

Chart 8: Private-Sector Credit and Gross Domestic Product Ratio
on page 115 (on the pdf viewer) and the context is particularly worth having a look at.

Page 25 (pdf viewer)

“Average weekly earnings in
the private sector declined by 0.5 per cent
on a year-on-year basis in the second quarter
while public sector earnings grew by 2.8 per
cent. The decline in private sector earnings
was driven by a fall in average weekly paid
hours with the overall hourly rate of pay
remaining unchanged in the quarter. The
data for Q2 show that trends in hourly rates
of pay vary across sectors with declines
recorded in financial, insurance and real
estate activities and construction, while hourly
pay in manufacturing increased modestly.”

Page 30

“The 2012
Competitiveness Scorecard benchmarks
our international performance on a broad
range of indicators and highlights a number
of areas that require further structural reform.
In addition to structural commitments under
the EU/IMF programme, the NCC stress the
need for improvement in: investment in next
generation broadband, reduced dependency
on imported energy and increased investment
in the renewables sector, more tax credits
for R&D, continued extension of Ireland’s
tax treaty network and a restoration of bank
lending. They also emphasise the importance
of competitiveness improvements in sheltered
sectors such as healthcare and legal services
where these costs compare unfavourably with
international competitors.”

Statistical Appendix:
Table A.1: Summary Irish Private Sector Credit and Deposits:

Credit advanced to the Irish private sector reduced by €22 billion in one year from €129bn to €107BN, a reduction of 17.!%. €19 billion of the 422 billion reduction is in the loans for house purchase category. This is a huge reduction. What is the explanation for this?

But there is only a 3 (3.3%) billion reduction in loans to NFCs to 86 billion.

This seems to mean that domestic households are doing the all the heavy lifting, with no ‘progress’ being made by the NFCs. Why is this?
Are the NFC loans non performing?
Or does NFC include many non domestic companies that the banking sector like to advance funds to?

We now seem to be in a position where deposits from the Irish private sector are covering loans to the Irish household sector but deposits from NFCs at approx 30 bn fall far short of the €86 bn loans to that NFC sector.

I concede that I not familiar with this data but there does appear to be a real mismatch in NFC sectoral funding.
Could this be addressed by ‘incentivising’ multinationals, to borrow from non-Irish banks, if that is part of the reason for the mismatch.

Put another way, are we squeezing the Irish household sector to deleverage, in order to provide cheap funding to multinational subsidiaries, who could easily access that funding through non-Irish banking sources.


RE: Commercial property. You have a real point there. The losses must be now pretty bad.
Table A.14 – continued: show that we still have €54 billion out to real estate / property dev. This seems extremely high after four years and billion of losses into the crisis.

PS: Is Prof Honohan now going to reduce all ICB salaries by 10%?
It looks from your excerpt that they probably got a nice little increase this year. Good going to get a wage increase in a bankrupt little country!

Via text from Blind Biddy to the Guv’nor:

The head of the Argentine Central Bank—Mercedes Marco del Pont–has been awarded the distinction as “the world’s worst central banker”. By whom, you might ask? Well, by Wall Street’s sycophantic press. Wall Street hates Mercedes. The woman, not the car.

Why? Well, for one thing she’s a woman. Wall Street hates female heads of central banks (take a look at the list of the top ten worst—3 out of 10 are female; then take a look at the 10 best, of which all but one are males.)

But that’s not anywhere near the most important reason. Ms. Marco del Pont kicked off the conference with a rousing talk, defending her central bank’s recent move away from a single mandate (inflation target) to pursuit of multiple mandates: financial stability, employment creation, and economic development with social equity.


So the CB is now shouting the odds (in various papers this morning) that wages in both the public and private sector are too high. In my travels around Europe this summer, it has become obvious to me that prices are incredibly high in Ireland too. Let’s hear a call to bring those down as well?

@PR Guy +2!
Never a truer word spoken.
Strange how costs of living are never mentioned by CB or ESRI – always ‘wages’
Does ‘wages’ include executive salary packages,professional fees paid to the army of ‘renters’ with their snouts permanently embedded in the now holed below the waterline state trough?Indeed does it include the well-heeled economists of the CB itself.
Look at the recent price increase announcements – health cover,energy,transport,education,state services and add in the impending taxes on property,water,increased prsi – and the CB calls for a faster pace of austerity!!


The high costs you mention are in part embedded in the Irish economy by both unreformed inefficiencies and domestic payroll costs which the central bank points out are high by international comparison, having to be charged for.

Some of the inflationary pressure is from oil prices and cheap liquidity from central banks is spilling over into speculation or investment which is keeping food and other raw materials prices higher than they should be. That used to be thought of as a recessionary influence, but forecasters seem to be imagining it will more or less just increase nominal GDP and make Ireland’s debt ratio look more flattering. I’m not convinced.

Your awareness of the real world problem of achieving simultaneous drops in both domestic costs and domestic wages suggests you might like to think about whether in the final analysis it will be concluded that the introduction of a parallel domestic currency might have been a smarter idea than the “no, you first, I insist!” glacial reform taking place which always seems to leave the organised and protected sectors favoured in comparison to the weaker elements in Irish society.

Personally, I suspect Dame St haven’t investigated this possibility at all.

‘Unreformed inefficiencies=embedded payroll costs=significantly more of national wealth cake for the ‘organised and protected’.
Even the Troika are coming up against the resistance of those you refer to.


Can you provide a little more detail or reference on how a dual currency system would work?
I saw it mentioned in passing a few times, but have little idea how it might work in practice.

The glacial ‘reform’ process is not only not working, it has killed any notion of a national interest in favour of organised or protected sectors.

Any idea which breaks that stranglehold of the current ‘glacial non reform’ is worthy of consideration.

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