52 replies on “Eddie Hobbs: Don’t Expect a Celtic Comeback”
Surely Constantin Gurdgiev would never use figures to mislead!?
… time for a ravenous little alghorithm that begins to reduce them radically.
Eddie’s colourful metaphors and gross exaggerations may make for good domestic entertainment and indeed often contributes to the debate. I am not sure that repeating this style in the WSJ is doing either him or his fellow countrymen any favours.
Seams Coffey’s post is very informative. I do not understand how Eddie Hobbs is getting published in the WSJ but there you go.
While Seamus Coffey clears up the figures he does make the following points:
“The overall thrust of the [Eddie Hobbs WSJ] piece is true. At best, we are at the end of the Celtic Collapse and the future direction of the economy is still uncertain.”
“All told, Ireland is looking at a massive debt overhang of around €500 billion. We don’t need to highlight the dangers of this excessive debt level by trying to pretend that the total is €850 billion.”
I am not a massive Eddie Hobbs fan, but I thought his chirps about the ECB, crony democracy, a Vichy regime and Ireland taking one for Europe were pithy and correct.
Eddie won’t be getting any invites to government hooleys anytime soon especially given his remarks about the intellectual capacity of the ranking government ministers.
Saying that “Enda Kenny leads a Vichy government” might make Eddie Hobbs sound intelligent in his own head, or to the readers of the United States Sunday Indo, but it’s an incredibly stupid and offensive statement. Whe is that nonsense going to end?
This is quite funny, even though its in German, and if you can stretch to the guy with the beard being analogous to Angela and the iPad to Keynesianism…
OTT but an article which hits a sufficient number of targets to make people sit up and take notice.
It may also be noted that what is happening in Ireland is by no means unique. The working out of a bubble in a monetary but not a federal union results in the same pressures in all the countries impacted.
The question is whether this is a salutary or a damaging experience. In Ireland’s case, I would suggest the former.
@ zhou_enlai
“I do not understand how Eddie Hobbs is getting published in the WSJ but there you go.”
There are a lot of people who do not understand why Enda Kenny’s mug shot was on the cover of Time Magazine.
@ rian Woods II
People need to break ranks with their fellow countrymen before they succeed in totally destroying the country altogether.
I presume what you mean by “not doing his fellow countrymen any favors or breaking ranks, is that it is not nice to tell foreigners how corrupt we really are and what is really going on? Is there some secret location we are invited to, so as to give our “views” on the Irish economy, so we don’t have to break ranks? I’d have to wear a bullet proof vest! BTW what are the gross exaggerations? Maybe he did not exaggerate enough ? I am thinking of the “seismic change” brigade? For instance, he should have regaled them with the one about the 1,300 allowances amounting to 1.5bn that were examined and that they could only find one that could be axed or that the public servants who helped the late Brian Lenihan draw up his second last budget in december 2009 insisted that they be excluding from the effects of the toxic austerity therein. A number of souls to the order of 640 comes to mind but it was probably much higher.
The contingent unfunded pension liability is already 120bn so I don’t know if it is worth keeping up the pretense. Obviously, you yourself are one of the more honest commentators.
When the NPRF was set up it was kick started by the sale of Eircom and was not supposed to be touched until 2025. Honohan at the time said, it needed to be shoul ring fenced from political interference and that there was also strong arguments in preventing the fund being invested in Irish corporates, presumably he was thinking of pressure being brought to bear on the managers of the funds by politicians. Ironically, the fund is now largely mono invested in bust Irish banks that will require another bailout or should I keep ranks and call it an extension of the first bailout? Honohan’s appointment as governor did nothing to stop the fund being sequestered by the Troika in fact ironically it was Honohan himself who signed the MOU Just another little irony I suppose.
Constantin Gurdgiev out forecasted the whole of the Dept of Finance throughout the crisis but had to do with appearances on Vincent Browne to get his points across. And of course the usual public sector carping and sniping and wink, wink nod, nod made sure that his career path would be… let’s just say ‘difficult”.
Sorry Brian I am having difficulty with my apple screen at the moment.
If I were marketing Irish bonds to US investors I might be a bit miffed at Eddie for writing article.
I don’t think it matters that much that he has taken the highest estimates of debt levels or that costs are not correct – nobody is going to take this article’s figures as gospel. What he has done is to provide for those US readers who might be receptive to it, a flavour of a different qualitative argument to that which they usually get.
It may be the case that official Ireland will be less able to ignore questions from the US than from domestic sources.
Ireland has long been viewed among US investors as a sort of Chicago-school black-box with low taxation, light regulation and a government and population that ‘gets it’ about the need to keep government out of the way – not like those socialist Europeans. The mantra about how Ireland has shown Europe the way by slashing public sector spending got repeated by US financial commentators and investors so often over the last 2 years it was laughable.
Maybe they just might open the box and have a peek in.
@Robert
“Sorry Brian I am having difficulty with my apple screen at the moment.”
The trick is not to put it on the extra rinse cycle. See link above.
I see that Eddie Hobbs tactfully overlooked the Obama administration’s apparent leading role in forcing us to go on bailing out the EZ core banks.
Grumpy,
Your scepticism towards the Irish recovery has ratcheted up as Irish bond yields have collapsed and Irish equities have rallied. I sense a PM who is underweight.
Similarly, one should also take Eddies track record into a/c. Was he advising retail investors against investing in property at the peak of the boom.
@tull
I’ve made a series of impartial observations. You are clearly not impartial towards the FG government.
Do you disagree with my comment above in some substantive way?
BTW your ‘sense’ is duff.
Grumpy,
1. Your comments are never impartial- they are generally on a Spectrum between negative and sceptical.
2. You are correct, I am partisan although I fear that the current govt is not moving fast enough.
3. Your observations have a grain of truth. We have a dynamic private sector that is being hobbled by rent seeking by both a cadre of private sector professions and a bloated public sector.
Given your general negativity , nobody could ever accuse you of talking your book given that you are overweight.
Bloated public sector? What is gov’t expenditure as a percent of GDP?
@tull
I think I am reasonably impartial. I don’t derive any pleasure from coming to negative or sceptical conclusions – I just call it as I see it.
You are right that I have been very sceptical, but I think if anything, even I haven’t, at least in some respects, been sceptical enough.
One of the things I have long been sceptical of is a timely link between fundamental analysis and market pricing.
The conclusion to the Eddie Hobbs article is about as good a summary as one could get in few lines about the Irish government’s current position.
“captive externally to creditors that still insist on loading bank debt onto the sovereign, and internally to a tribe of insiders led by union godfathers in a deal that protects the government’s own excessive pay and pensions while bankers lean over its shoulders to rewrite insolvency laws. ”
The debt figures may not be technically wrong but, as shown by Seamus Coffey, have little relevance to the Irish domestic economy per se. The fact is that all corporate borrowings for multinationals are now routed through the ‘Irish banking’ system rather than by means of intercompany loans and other methods as heretofore.
The large figures are a representation of the extent to which the Irish MNC economy is financed and funded from non-Irish sources but routed in the last few years through the ‘Irish’ banking system.
In order to get a comparative Debt /GDP % equivalence to other countries, one should really add the repatriated profits/royalties of the MNCs.
Ernie,
A bloated public sector consists of some of the highest paid public servants in the western world.
Grumpy,
I share you scepticism about Market pricing – the implied probability of default was too high in mid 2011. It might even be too low now , who knows.
And nobody is impartial here- everybody has their axe. Even Eddie has an axe.
Every person here has one axe to grind, regardless of reality or relevance – public sector pay. Union ‘Godfathers’ indeed – Christ
@Tullmcadoo
What is gov’t expenditure as a percentage of GDP?
@ rf
It is about time we stopped grinding the axe and actually used it.
Even if the numbers related to our debts have been exaggerated it’s still unfeasible to imagine that the money supply will expand enough to repay all our debts.
Bearing in mind that to expand the money supply someone has to walk into a bank and organise a loan, creating a higher amount of debt than money, it’s easy to see how unsustainable this haphazard system of money creation is.
It’s also a shame that 1 in 5 mortgages are in arrears and no-ones questioning why that’s the case. It’s simply because what’s in circulation is the principal of every loan (plus the small amount of cash in the economy). What’s owed back is the principal plus interest and as such it’s impossible for all loans to go according to plan.
It’s makes far more sense to have a much higher proportion of the money supply created publicly such that at least we could make it mathemtically feasible for all loans to go according to plan.
Ben Dyson from Positive Money will be on BBC Radio 4 on Wed 24th October at 8:45pm discussing these issues in more detail.
As well as that the IMF have released ‘The Chicago Plan Revisited’ which concludes very positively on this idea.
Sure. Might make everyone here and in the Irish Media happy, but would probably achieve very little. But then that’s Ireland isn’t it? No reason to actually think something through logically and plan for the future when we can just do whatever the voices in our heads are telling us
Was it the voices in their heads that told them they deserve more money than people across the EU doing the same jobs.
I believe it is time to ignore the voices in these peoples little heads and benchmark the whole lot of them to realistic rates commensurate, not with what we can borrow, but what we can afford. If the state must go bankrupt for this to happen as seems likely, then so be it. Maybe that is what we need to overcome the inertia and vested interests the yes minister permanent civil servants types whose grasp on reality seems to always equate to how much more debt we can we borrow.
No more of this we are technically solvent ergo we can borrow more from our own children and generations not even born. No more mistaking liquidity in the public finances for insolvency. When the late Brian Lenihan was told by none other than Pat Kenny that his guarantee was for 440bn and that if a significant portion of it was called in, it would bankrupt the state and that he ,(Lenihan) “would be infamous, he just shrugged it off and said, “I know that but it will never happen because this is a liquidity crisis”. The herculean task of public servants and economists who lecture and advise ministers has been to come up with esoteric statistics that say “this is manageable” then they look the other way or give some other lame duck excuse when thing don’t work out according to their scientific abacus. . Meanwhile, they still get the full monty when it comes to salaries, pensions, increments etc. Cardiff had to be foisted on the ECA even though they did not like the cut of his jib after his department made mistakes of 3.8bn in estimating the public debt and that was on top of him being responsible for banking policy and being central to the advice given to the late finance minister. BoI doubled its loan book from 100bn to 200bn between 2004 and 2008 according to Mr. Soden. That was some banking policy and some oversight of banking yet they all retire with obscene handouts from the state and gold plated pensions payed for by the victims?
Promotion is often the only way to “get rid” of the incompetent. Unfortunately, that has not worked out too well for our economy has it?
Great piece by Seamus Coffey, an impressively fast, comprehensive and coherent reply.
Eddie Hobbs going all Morgan Kelly on us, will he be on here or anywhere to defend his views or critics, or will he do a Morgan?
My take is he’s right with comments like
‘Irish household debt is unsustainable’. Though I’m curious as to who/what he knows from behind the scenes:’….such reform is being stiffly resisted behind the scenes by the banking lobby and the ECB’
I’m also curious as to why he doesn’t mention the Gaurantee, perhaps it conflicts with his ECB shafted us narrative, though it does support his Crony democracy narrative, so why not mention it?
‘Irish labour costs are too high’ ‘job losses have been privatized’. Both points are true and both reflect policies of action or inaction, he could have mentioned that this is particularly and depressingly true for the young. He is right to highlight the pension bill, something the country will eventually have to tackle.
Though our representatives pay themselves far too much, which he’s right to point out, they don’t deserve digs like ‘brings the intellectual firepower of three secondary-school teachers and a trade unionist to bear on Ireland’s…’ in poor taste, mean and isn’t required to make his point.
Overall C.
Points deducted for no reference to the Guarantee, unnecessary attack, and his poor sums.
Points gained for being right/nearly right on key points of future pension bill, mortgage arrears crisis, the highlighting of public sector largesse and the unfairness of the privatisation of bank debt policy.
@ John Foody
The fact that Gilmore and Howlin are former trade union activists is very, very relevant, as is, the fact that we have a bunch of school teachers who got into politics running the country. They have no business experience no record of understanding what it takes to run a business have never had to find money outside of the exchequer to employ anyone. Their policies have been described as “economic apartheid” a description I happen to strongly agree with.
“As long as there are individual national budgets, I regard the assumption of joint liability as inappropriate and from our point of view this isn’t up for debate…The Spanish government will be liable for paying back the loans to recapitalize its banks. Plans to give the Euro rescue fund the power to inject cash directly into banks won’t be made retroactive.”
-German Chancellor Merkel
I believe her and the fig leaf has now been ripped away from the folly of the Croke Park deal and even a school teacher using basic arithmetic knows that cutting another 88 allowances is meaningless.
@tull
I share you scepticism about Market pricing – the implied probability of default was too high in mid 2011.
This more or less implies that you are optimistic about the country either achieving its official growth projections from now on, or getting really significant relief on the bank debt, or both. Which of these are you expecting to see?
From the Guardian Oct. 19th 2012
There has to be something useful in this varied list.
Economic policy
Alternatives to austerity: 10 ideas from across the political spectrum
From cutting middle-class benefits to making it easier to fire workers, here are some ideas for rescuing the economy
The Trades Union Congress march on Saturday is being held under the slogan “A Future that Works” as part of a campaign to force the government to consider alternatives to austerity measures. Here are some ideas from across the political spectrum.
1. Activist industrial policy
A version of picking winners, where the government backs certain sectors with significant funding support, whether direct grants or through an infrastructure bank. One clear example, already backed by successive governments, is aerospace. It could joined by, for instance, electric cars and tidal power.
Backers: Vince Cable, and Lord Adonis all favour a more dynamic industrial landscape.
Feasibility: high, if the government of the day can find the money and policies to back the underlying requirements. In the words of Lord Adonis, the following need prolonged backing: skills, technology, innovation, government procurement, infrastructure, finance, and supply chains. Picking winners is not as simple as it sounds.
Will it work? Yes, but this is a long-term strategy that requires political consensus, from changes to education policy to supporting industries that have long lead-times (civil aircraft programmes work on 30-40 year cycles, for instance).
2. Specialist banks
Create a state bank or a series of specialist banks, targeted at specific sectors. This could be a national infrastructure bank (for roads), a national green bank (for tidal power), regional banks (akin to the German Landesbank system) or a small to medium-sized business bank. This is a long and impractical wish list – setting up one bank is difficult enough – but Vince Cable, the business secretary, has already announced plans for a “business bank” that could leverage up to £10bn.
Backers: TUC, Cable, the Labour party.
Feasibility: high, but funding is the issue.
Will it work? It would need strict lending parameters, to prevent the Fannie-Mae-and-Freddie-Mac-style sprees that stoked the US housing boom.
3. Corporate governance overhaul
This would see more employees represented on management boards and remuneration committees in a way similar to the German stakeholder system. Lord Glasman, the Labour life peer, says it will harness the energy, skills and commitment of a workforce. “A third of the board should be reserved for capital, a third for the workforce and a third for users and local interests. This would enable the negotiation of a corporate strategy in which the good of the firm is owned by each of its principle stakeholders. Accountability is too important to be left to accountants. That is a fundamental lesson of the crash.”
Backers: Germany, Glasman.
Feasibility: low, because it is unlikely that the City, shareholders or companies would comply without legislation.
Will it work? Representatives would have to be put on Plc boards, not management boards, or companies would find a way around them.
4. Cut middle-class benefits to fund infrastructure spending
The Social Market Foundation (SMF), a thinktank, argues that benefits for the comparatively better-off should be cut and reinvested in infrastructure. Around £15bn could be raised by cutting free bus passes and television licences for some better-off pensioners, as well as halving higher-rate pension tax relief and axing child benefits for the top 50% of earners.
Backers: SMF. Ian Mulheirn, director of the SMF, says: “We are screaming out for infrastructure investment, but if we are worried about funding it with extra borrowing, then the answer is to cut middle-class benefits that do nothing for growth.”
Feasibility: medium. The Conservatives will not want to cut pension tax relief for a core segment of their voters. Labour and the Liberal Democrats would be more sympathetic.
Will it work? It would be a significant public spending cut and the funds could be leveraged, so it would definitely get projects started, although the boost would be medium- to long-term.
5. ‘Guerilla economic development’
An idea floated by Karel Williams and Sukhdev Johal from the CRESCCresc research centre at the University of Manchester. Under one example, local council pension funds would be used to build social housing. These houses would be built on terrain such as land banks compulsorily purchased from housing developers and retailers such as Tesco. Similarly, public assets could be put in public trust for use by the local community. The Conservative MP for Dover, Charlie Elphicke, is trying to buy Dover Port on behalf of the local population.
Backers: Karel Williams and Sukhdev Johal, Charlie Elphicke
Feasibility: taking land off Tesco is illegal, but compulsory purchasing orders offer a way around that. The Port of Dover faces fewer legal impediments.
Will it work? Again, success would be long-term but it would effectively devolve economic power to local councils and regions.
6. Adopt the full Beecroft report
The report into employment law by Adrian Beecroft, a venture capitalist, is viewed as something of a rightwing nuclear option. Elements of the report have been decried by Cable as “complete nonsense”, led by proposals to make it easier for firms to sack underperforming staff. Nonetheless, George Osborne’s suggestion that workers give up employment rights in exchange for shares is seen as a follow-up to the report.
Backers: Adrian Beecroft
Feasibility: unlikely because of the likely reaction of centrist voters and Liberal Democrats.
Will it work? The effect would be immediate but it could be unexpected – strikes, for instance.
7 Change the Bank of England inflation target to a nominal GDP growth target
Instead of focusing on a 2% inflation target, the monetary policy committee – which sets interest rates – could go for economic growth instead.
Backers: the US economist Scott Sumner.
Feasibility: the BoE would have to be convinced that it would not lead to spiralling inflation.
Will it work? If it resulted in GDP rising, the BoE would have to be vigilant to ensure that inflation did not wipe out the benefits.
8. The Alistair Darling plan
The plan of halving the economic deficit over four years – Labour’s 2010 general election policy – would have led to less stringent spending cuts than those envisaged under the coalition. George Osborne has targeted eliminating the deficit by 2015.
Backers: Darling.
Feasibility: nil, given the election result.
Will it work? If that plan had been put to the electorate now, the general election result might have been different. It would have taken less demand out of the economy too.
9. Relax immigration restrictions
Jonathan Portes at the National Institute of Economic and Social Research (NIESR) argues that the government should lower barriers to skilled immigrants from outside the European Union. He also argues that restrictions on non-EU students, and rules on their ability to secure jobs in the UK, should be relaxed.
Backers: NIESR.
Feasibility: unlikely under a government with Conservative leanings.
Will it work? NIESR’s ideas certainly get a sympathetic hearing from sections of the business community, which are crying out for skilled labour.
10. Tax increases
• The TUC is calling for a number of tax changes to raise income and reduce the impact of the recession on the less well-off. It wants to equalise the rates for income tax and capital gains tax, to restore the top rate of tax to 50p, introduce a “Robin Hood” tax on financial transactions and abolish the domicile rule that allows people to avoid UK tax.
Backers: TUC.
Feasibility: Osborne is not expected to reverse the reduction of the top tax rate from 45p to 50p.
Will it work? The Robin Hood tax, in particular, needs an international consensus that would be difficult to achieve. A 50p reversal would appeal to voters.
@ RB
The union connection is relevant, agreed, the lack of private sector experience among TDs is also something worth pointing out, however the suggestion that they have no ‘intellectual fire power’ BECAUSE of it or their background in education is to my mind wrong and suggests a kind of snobbery on his part.
It’s playing the man not the ball. Would he say Seán Lemass lacked ‘intellectual fire power’ due to his lack of a PHD?
Or to put it another way, one can have intellectual ability without holding a piece of paper from a university.
anonym,
Would that it were that simple. I do not you can lose sight of how this might end. On the “good” side, what is required for the periphery is a mix of fiscal tranfers, debt restructuring, easy monetary policy with a dash of non conventional policy otherwise known as QE. Otherwise the perihery defaults, the EZ dissolves and EU descends into an abyss for the third time in a century.
We seem to lurch between the two polls. Despite that the communtariat stays resolutely negative for the most part. I was genuinely optimistic after the Summer summit & Draghi’s victory over BUBA as I thought it ticked a lot of the boxes for a successful outcome. I suspected though that like any document agreed at 4am, some parties would endeavour to un-negotiate it. I guess that is happening right now.
Where do we go from here? The periphery has upheld its part of the bargain to a large extent. It is now up to the FANGs as to how they want this to end. If they backslide on the Summer agreement, Europe will plunge into the depths of a depression.
I love the way so many commentators these days have jumped on the mortgage arrears bandwagon as though it’s only just come to light and they are being some kind of prophet by saying it’s going to get worse.
It has been known within banking and government circles since 2009 that Ireland was going to have a mortgage arrears crisis but nobody has actually done anything about it because they don’t have an answer that doesn’t employ some radical thinking/actions……. and heaven forbid we should ever do something like that.
Isn’t there some old Chinese saying about the danger of taking a great leap forward is that you might tear your ball5 off?
@ All
The level of histrionics in the Sindo, and to a lesser extent in the Sunday Times, is really something!
As a counterpoint, the results of the recent MBRI poll for the Irish Times are worth drawing attention to.
“On the issue of whether the European Union will agree to a deal that will ease the burden of bank debt on the Republic, the poll shows that a majority of Irish voters are sceptical.
Asked for their opinion on the issue just 18 per cent of respondents said they believed the link between bank and sovereign debt would be broken, while 46 per cent said it would not and 36 per cent had no opinion.
Only Fine Gael voters had any degree of confidence that an agreement to ease the debt would be arrived at, while Labour voters were the most sceptical.
Farmers and the best-off AB social group were the most confident that a positive deal for the Republic would be achieved, while the poorest DE category were the most sceptical.
Men are twice as likely as women to believe that the European Union will ultimately do a good deal for the Republic and men are far less likely to answer don’t know in response to the question.”
The government would clearly get no prizes for its handling of the banking debt or other issues and the public are equally aware of this if the same opinion poll is any guide. A drop of 40% in approval ratings is hardly minor.
However, a real question has also to be asked of the media and commentariat. The level of parochialism and myopia in its coverage, with some notable exceptions, was brought home to me by this coverage in the Telegraph.
It may be that the plain people of Ireland have a better grasp of reality than many allow them. They are not critical of the government for taking difficult decisions but for failing to take any at all. A radical situation requires radical measures. The people seem to know this and will go along with them provide the burden is shared equitably. If the penny has not dropped with the government by now, it is unlikely to ever do so.
Meanwhile, on the evidence, the EU is moving towards some kind of overall deal between now and Christmas on the other aspects of the crisis. Will the bulk of the Irish media and commentariat even notice?
@ Robert Browne
Some fairly damning hyperbole are tossed around our Dail chamber on a daily basis but even the opposition know that when abroad they should be wearing the green flag. That doesn’t mean hide the truth, it means the tone of the message should be tempered. Eddie should have provided a much more balanced critique but then the WSJ readership revel in reading about the failure of Europe’s social model with references to WWII a real bonus.
Eddie has produced his trademark populist rant against public servants, bankers, politicians, trade unionists, Nazis and school teachers (I guess Eddie wasn’t a star pupil at school). But note how he avoids one of our elephants. Social Protection rates here are almost twice what they are north of the border. No populist dividend in slamming the OAP, so let’s avoid that one.
As an Irish citizen I would love to be forgiven some bank related debt as I would welcome any handout. I do not subscribe to the majority view on this blog that we have a moral claim to this largesse nor to the view that we are being oppressed by a latter day Third Reich.
What would worry me would be if any such gift were used to avoid the real running sore which is that the government are spending a billion a month more than they take in revenue. The government would love to use any handout to relax its requirement to address the real problem which is to confront the vested interests which Eddie has correctly identified.
@ Brian Woods II
I agree. Eddie is no saint but just because he used “populist methods” in his Rip off Ireland series does not mean he is not 95% correct in his WSJ piece. Did Bertie not use populist methods to get three terms in power? Sometimes hyperbole is useful and necessary as a tool I use it myself to counter out and out government propaganda much of which springs eternal from government departments and satellite quango’s including the ESRI who have produced little of value to solve this crisis. It is time for the one page solutions not the ‘erudite’ and clever use of statistics to obscure state failures and retard reforms.
Don’t pay anymore bonds,
End Croke Park.
Refuse to pay another red cent on Anglo promissory notes.
Bring in proper personal insolvency legislation which the banks have no control.
Insist that debt forgiveness is commensurate with state recapitalizations that have taken place.
I would have as a wider objective the revamping of the PS the HSE which is a law onto itself and our infamous Welfare system to make all theree fit for purpose.
On a more strategic level having left the stable door unlocked and realizing the horse has bolted, see how we can be as obstructive as possible henceforth in Europe as opposed to our policies of abject surrender.
@ Robert Browne
Isn’t that a rather inadequate respose to our being forced into Vichy style submission? Why not stop buying German cars, apologise to England for not supporting her in WWII and let’s stuff them 6-0 on our return World Cup match!
The morality argument is this:
Merkel has a duty to protect her citizens interests. She is doing this well. She is acting morally.
Our government has a duty to protect its citizens. It is not doing this. It is lying to itself and to us. It is turning us into a nation of craven beggars. That is amoral.
@tull
You’re right, there probably is a third possibility: that enough QE will keep the Irish sovereign-debt show on the road without any ‘PSI’, for an extended period. Don’t count on there being much left over for anyone else, though. This could be one of those be-careful-what-you-wish-for situations.
What exactly does “end/ditch/scrap CP” mean and how does it save a penny? If you mean “cut public sector nominal wages” then man up and say it. But cost it out….in full (in your answer refer to recent IMF shortrun multiplier analyses)….
oh, i forgot
Ceterum censeo IBRC delendam esse
@ Brian Woods II
“Isn’t that a rather inadequate respose to our being forced into Vichy style submission”?
Well who is it in Ireland that’s being forced into Vichy style submission and by whom? Plenty of people have said to me now is an ideal time to mop up a few properties and the repossessions that Gregory would like to see.
Personally, I have no difficulty with the bankrupt country we live in being forced to live within its means provided the burden is distributed and shared, We must resist red tooth and claw being taken for a fool and used as part of a ritual sacrifice by those who think that they can push the burden onto others just because they can cut deals from inside the system.
Also, it did not take much to “force” us into submission. We have not even seen the Trichet letter which must have been a very frightening diatribe. Truth is our leaders jumped into the bailout rather than force the issue. I think Damien Kiberd called the MOU “a surrender document”. Remember Morgan Kelly. ” for once the late Brian Lenihan was actually doing the right thing in saying we could survive to the middle of the following year” but then Honohan in his hotel room in Brussels thought ‘I must tell the Irish people what is going on, people would expect Patrick to tell them’ RTE were contacted and a requested slot on Morning Ireland.
It certainly does not take much to frighten the living daylights out of our public servants. Don’t tell them the ATM’s won’t pay out rather tell them their salaries will not be paid! Job done!
Would a student referring to recent IMF fiscal multiplier analysis not have to be very careful not to fall into the trap of comparing apples with oranges without realising it?
Deciding the wisdom of cutting public spending or not is say, an apple.
If there is no flexibility available and the cuts have to be made anyway – say, under a Troika programme, shouldn’t the brighter students be expected to concentrate on the merits and multiplier effects or otherwise of cutting services in preference to cutting salaries? That might be a bit orangy.
re John Foody:’I’m also curious as to why he doesn’t mention the Gaurantee, perhaps it conflicts with his ECB shafted us narrative, though it does support his Crony democracy narrative, so why not mention it?’
I don’t know why he didn’t mention it either, but if anything it backs up the fact that the ECB ‘shafted’ us. There have been almost a dozen public ‘leaks’ by the people involved that the govt. were in consultation with eurozone finance ministers, and more specifically, received forceful pressure from Trichet that the banks were to be protected at ”all costs”. Only wilfull blindness can, at this stage, fail to identify this with the guarantee.
I’ve included a few links on the Colm McCarthy thread relevant to this – just what came to hand with little effort & by no means exhaustive.
@ Mark
I assure you im not wilfully blind, the Gaurantee was not 100% the ECBs doing, There is no evidence, that such a scope of a Guarantee was demanded, morever the poor policy decisions and inaction that preceded it was appauling…well, I suppose the ECB forced us to join the euro too? Perhaps if you were a little bit more ‘exhaustive’ you’d know better.
Did the ECB later prove that was capable of issuing threats to the country to force something like the guarantee ? Yes: http://namawinelake.wordpress.com/2012/01/09/ecb-refuses-to-hand-over-november-2010-threat-letter-sent-to-brian-lenihan/
How long did it take before the identity of the Anglo bondholders was admitted ? We had the smokescreen of goldencircles and developers for months.
Enda today : ‘Ireland had the European position imposed on it’ – specifically on the unguarnteed bonds, but…
I don’t believe that the ECB were unaware of the extent of liabilities held here, and if they say a threat to the eurozone financial system in the unsecured bonds, they certainly saw one in 2008
and despite their declared disapproval & ignorance of the guarantee – “To my knowledge everything was explained and discussed ex poste … If I remember well, it was at the end of the September 2008 when the Irish authorities – without notification here [in Brussels] – extended an unlimited guarantee to assets, also to creditors; and all those bondholders than can benefit from this unlimited guarantee, they are protected. This was not our decision … We were dealing the day after with how do you say – a fait accompli,” – within a month the ECB were advocating similar bank guarantees for the rest of eurozone members ;
“With a view to complementing the actions taken by the ECB in the interbank money market, the Governments of the Euro Area are ready to take proper action in a concerted and coordinated manner to improve market functioning over longer term maturities. The objective of such initiatives should be to address funding problems of liquidity constrained solvent banks. […] To this aim, Governments would make available for an interim period and on appropriate commercial terms, directly or indirectly, a Government guarantee, insurance, or other similar arrangements of new medium-term (up to 5 years) bank senior debt issuance http://www.ecb.int/pub/pdf/other/recommendations_on_guaranteesen.pdf
Later, they approved & encouraged it’s extension.
I note that there is a position held by the left that the subsequent fingering of the ECB that I hold to is a self-preserving revisionism; eg; Irish Left Review: ‘
”It’s one thing for the Irish moneyed class to say that the ECB forced them into the 2008 bank guarantee, it’s another for progressives/leftists to fall for it.”
But we’ve here a political grouping that is would rather a european solution than the danger of a native corruption manipulating some popular nationalism in order to survive.
It’s not a case of either/or when attributing blame or cause, though
I could have cut to the chase
– the bank execs did not benefit by the extension of a guarantee to cover their creditor’s losses. But is implied in the Trichet mandate ‘at all costs’, and the beneficiaries were and are the financial institutions of Ireland.
‘…were and are the financial institutions of EUROPE.’
I need some sleep.
@ Robert Browne
Constantin Gurdgiev out forecasted the whole of the Dept of Finance throughout the crisis but had to do with appearances on Vincent Browne to get his points across. And of course the usual public sector carping and sniping and wink, wink nod, nod made sure that his career path would be… let’s just say ‘difficult”.
There are political opinions (despite claims, “political economy” is full of them) and associations that I might suggest would be perhaps more representative of reasons why one C. Gurdgiev might possibly have been given a wide berth by institutions here.
@ EWI
The man is still worth multiples of his peers and that of course is his main problem. Talent is seen as a grave threat to the inadequate and weak. Who was it that said we suffered from “group think”? Oh! they all said it! We must not suffer from “group think” then, having got that out of the way, they go back to group think because that is all what they are most comfortable with. It’s also the alpha and the omega of how you “get ahead’.
At least Mr. Gurdgiev is not the type who gets sick in the pit of his stomach coming in to work, by train, to the DoF everyday, to advise the minister for finance. We would not be in the position we are in today if we had not isolated Kelly, Gurdgiev and even Matthews (used electorally then isolated) but that is what we do here in this country. When we cannot refute or disprove, we take the easier option of shunning and whispering, then later, bowing and scraping to our new masters. We are dependent now on “the kindness of strangers” and that is apparent like never before in recent days.
Give me a Gurdgiev any day of the week I don’t care who he associates with and I am quite sure he will be having the last laugh.
Robert Browne is spot on, as usual.
The banking weapon was used by the English/Venetians against Catholic Royalist France, using the proven talent of John Law.
Ireland continues to lose population, a trend started after the Famine.
52 replies on “Eddie Hobbs: Don’t Expect a Celtic Comeback”
Surely Constantin Gurdgiev would never use figures to mislead!?
… time for a ravenous little alghorithm that begins to reduce them radically.
Eddie’s colourful metaphors and gross exaggerations may make for good domestic entertainment and indeed often contributes to the debate. I am not sure that repeating this style in the WSJ is doing either him or his fellow countrymen any favours.
Seams Coffey’s post is very informative. I do not understand how Eddie Hobbs is getting published in the WSJ but there you go.
While Seamus Coffey clears up the figures he does make the following points:
“The overall thrust of the [Eddie Hobbs WSJ] piece is true. At best, we are at the end of the Celtic Collapse and the future direction of the economy is still uncertain.”
“All told, Ireland is looking at a massive debt overhang of around €500 billion. We don’t need to highlight the dangers of this excessive debt level by trying to pretend that the total is €850 billion.”
I am not a massive Eddie Hobbs fan, but I thought his chirps about the ECB, crony democracy, a Vichy regime and Ireland taking one for Europe were pithy and correct.
Eddie won’t be getting any invites to government hooleys anytime soon especially given his remarks about the intellectual capacity of the ranking government ministers.
This WSJ report suggest Angela is ready to take on the fighting Irish …and everyone else.
http://online.wsj.com/article/SB10000872396390444734804578066543428622954.html?mod=WSJEurope_hpp_LEFTTopStories
Saying that “Enda Kenny leads a Vichy government” might make Eddie Hobbs sound intelligent in his own head, or to the readers of the United States Sunday Indo, but it’s an incredibly stupid and offensive statement. Whe is that nonsense going to end?
This is quite funny, even though its in German, and if you can stretch to the guy with the beard being analogous to Angela and the iPad to Keynesianism…
http://www.snotr.com/video/8965/
OTT but an article which hits a sufficient number of targets to make people sit up and take notice.
It may also be noted that what is happening in Ireland is by no means unique. The working out of a bubble in a monetary but not a federal union results in the same pressures in all the countries impacted.
The question is whether this is a salutary or a damaging experience. In Ireland’s case, I would suggest the former.
@ zhou_enlai
“I do not understand how Eddie Hobbs is getting published in the WSJ but there you go.”
There are a lot of people who do not understand why Enda Kenny’s mug shot was on the cover of Time Magazine.
@ rian Woods II
People need to break ranks with their fellow countrymen before they succeed in totally destroying the country altogether.
I presume what you mean by “not doing his fellow countrymen any favors or breaking ranks, is that it is not nice to tell foreigners how corrupt we really are and what is really going on? Is there some secret location we are invited to, so as to give our “views” on the Irish economy, so we don’t have to break ranks? I’d have to wear a bullet proof vest! BTW what are the gross exaggerations? Maybe he did not exaggerate enough ? I am thinking of the “seismic change” brigade? For instance, he should have regaled them with the one about the 1,300 allowances amounting to 1.5bn that were examined and that they could only find one that could be axed or that the public servants who helped the late Brian Lenihan draw up his second last budget in december 2009 insisted that they be excluding from the effects of the toxic austerity therein. A number of souls to the order of 640 comes to mind but it was probably much higher.
The contingent unfunded pension liability is already 120bn so I don’t know if it is worth keeping up the pretense. Obviously, you yourself are one of the more honest commentators.
When the NPRF was set up it was kick started by the sale of Eircom and was not supposed to be touched until 2025. Honohan at the time said, it needed to be shoul ring fenced from political interference and that there was also strong arguments in preventing the fund being invested in Irish corporates, presumably he was thinking of pressure being brought to bear on the managers of the funds by politicians. Ironically, the fund is now largely mono invested in bust Irish banks that will require another bailout or should I keep ranks and call it an extension of the first bailout? Honohan’s appointment as governor did nothing to stop the fund being sequestered by the Troika in fact ironically it was Honohan himself who signed the MOU Just another little irony I suppose.
Constantin Gurdgiev out forecasted the whole of the Dept of Finance throughout the crisis but had to do with appearances on Vincent Browne to get his points across. And of course the usual public sector carping and sniping and wink, wink nod, nod made sure that his career path would be… let’s just say ‘difficult”.
Sorry Brian I am having difficulty with my apple screen at the moment.
If I were marketing Irish bonds to US investors I might be a bit miffed at Eddie for writing article.
I don’t think it matters that much that he has taken the highest estimates of debt levels or that costs are not correct – nobody is going to take this article’s figures as gospel. What he has done is to provide for those US readers who might be receptive to it, a flavour of a different qualitative argument to that which they usually get.
It may be the case that official Ireland will be less able to ignore questions from the US than from domestic sources.
Ireland has long been viewed among US investors as a sort of Chicago-school black-box with low taxation, light regulation and a government and population that ‘gets it’ about the need to keep government out of the way – not like those socialist Europeans. The mantra about how Ireland has shown Europe the way by slashing public sector spending got repeated by US financial commentators and investors so often over the last 2 years it was laughable.
Maybe they just might open the box and have a peek in.
@Robert
“Sorry Brian I am having difficulty with my apple screen at the moment.”
The trick is not to put it on the extra rinse cycle. See link above.
I see that Eddie Hobbs tactfully overlooked the Obama administration’s apparent leading role in forcing us to go on bailing out the EZ core banks.
Grumpy,
Your scepticism towards the Irish recovery has ratcheted up as Irish bond yields have collapsed and Irish equities have rallied. I sense a PM who is underweight.
Similarly, one should also take Eddies track record into a/c. Was he advising retail investors against investing in property at the peak of the boom.
@tull
I’ve made a series of impartial observations. You are clearly not impartial towards the FG government.
Do you disagree with my comment above in some substantive way?
BTW your ‘sense’ is duff.
Grumpy,
1. Your comments are never impartial- they are generally on a Spectrum between negative and sceptical.
2. You are correct, I am partisan although I fear that the current govt is not moving fast enough.
3. Your observations have a grain of truth. We have a dynamic private sector that is being hobbled by rent seeking by both a cadre of private sector professions and a bloated public sector.
Given your general negativity , nobody could ever accuse you of talking your book given that you are overweight.
Bloated public sector? What is gov’t expenditure as a percent of GDP?
@tull
I think I am reasonably impartial. I don’t derive any pleasure from coming to negative or sceptical conclusions – I just call it as I see it.
You are right that I have been very sceptical, but I think if anything, even I haven’t, at least in some respects, been sceptical enough.
One of the things I have long been sceptical of is a timely link between fundamental analysis and market pricing.
The conclusion to the Eddie Hobbs article is about as good a summary as one could get in few lines about the Irish government’s current position.
“captive externally to creditors that still insist on loading bank debt onto the sovereign, and internally to a tribe of insiders led by union godfathers in a deal that protects the government’s own excessive pay and pensions while bankers lean over its shoulders to rewrite insolvency laws. ”
The debt figures may not be technically wrong but, as shown by Seamus Coffey, have little relevance to the Irish domestic economy per se. The fact is that all corporate borrowings for multinationals are now routed through the ‘Irish banking’ system rather than by means of intercompany loans and other methods as heretofore.
The large figures are a representation of the extent to which the Irish MNC economy is financed and funded from non-Irish sources but routed in the last few years through the ‘Irish’ banking system.
In order to get a comparative Debt /GDP % equivalence to other countries, one should really add the repatriated profits/royalties of the MNCs.
Ernie,
A bloated public sector consists of some of the highest paid public servants in the western world.
Grumpy,
I share you scepticism about Market pricing – the implied probability of default was too high in mid 2011. It might even be too low now , who knows.
And nobody is impartial here- everybody has their axe. Even Eddie has an axe.
Every person here has one axe to grind, regardless of reality or relevance – public sector pay. Union ‘Godfathers’ indeed – Christ
@Tullmcadoo
What is gov’t expenditure as a percentage of GDP?
@ rf
It is about time we stopped grinding the axe and actually used it.
Even if the numbers related to our debts have been exaggerated it’s still unfeasible to imagine that the money supply will expand enough to repay all our debts.
Bearing in mind that to expand the money supply someone has to walk into a bank and organise a loan, creating a higher amount of debt than money, it’s easy to see how unsustainable this haphazard system of money creation is.
It’s also a shame that 1 in 5 mortgages are in arrears and no-ones questioning why that’s the case. It’s simply because what’s in circulation is the principal of every loan (plus the small amount of cash in the economy). What’s owed back is the principal plus interest and as such it’s impossible for all loans to go according to plan.
It’s makes far more sense to have a much higher proportion of the money supply created publicly such that at least we could make it mathemtically feasible for all loans to go according to plan.
Ben Dyson from Positive Money will be on BBC Radio 4 on Wed 24th October at 8:45pm discussing these issues in more detail.
As well as that the IMF have released ‘The Chicago Plan Revisited’ which concludes very positively on this idea.
Sure. Might make everyone here and in the Irish Media happy, but would probably achieve very little. But then that’s Ireland isn’t it? No reason to actually think something through logically and plan for the future when we can just do whatever the voices in our heads are telling us
Was it the voices in their heads that told them they deserve more money than people across the EU doing the same jobs.
I believe it is time to ignore the voices in these peoples little heads and benchmark the whole lot of them to realistic rates commensurate, not with what we can borrow, but what we can afford. If the state must go bankrupt for this to happen as seems likely, then so be it. Maybe that is what we need to overcome the inertia and vested interests the yes minister permanent civil servants types whose grasp on reality seems to always equate to how much more debt we can we borrow.
No more of this we are technically solvent ergo we can borrow more from our own children and generations not even born. No more mistaking liquidity in the public finances for insolvency. When the late Brian Lenihan was told by none other than Pat Kenny that his guarantee was for 440bn and that if a significant portion of it was called in, it would bankrupt the state and that he ,(Lenihan) “would be infamous, he just shrugged it off and said, “I know that but it will never happen because this is a liquidity crisis”. The herculean task of public servants and economists who lecture and advise ministers has been to come up with esoteric statistics that say “this is manageable” then they look the other way or give some other lame duck excuse when thing don’t work out according to their scientific abacus. . Meanwhile, they still get the full monty when it comes to salaries, pensions, increments etc. Cardiff had to be foisted on the ECA even though they did not like the cut of his jib after his department made mistakes of 3.8bn in estimating the public debt and that was on top of him being responsible for banking policy and being central to the advice given to the late finance minister. BoI doubled its loan book from 100bn to 200bn between 2004 and 2008 according to Mr. Soden. That was some banking policy and some oversight of banking yet they all retire with obscene handouts from the state and gold plated pensions payed for by the victims?
Promotion is often the only way to “get rid” of the incompetent. Unfortunately, that has not worked out too well for our economy has it?
Great piece by Seamus Coffey, an impressively fast, comprehensive and coherent reply.
Eddie Hobbs going all Morgan Kelly on us, will he be on here or anywhere to defend his views or critics, or will he do a Morgan?
My take is he’s right with comments like
‘Irish household debt is unsustainable’. Though I’m curious as to who/what he knows from behind the scenes:’….such reform is being stiffly resisted behind the scenes by the banking lobby and the ECB’
I’m also curious as to why he doesn’t mention the Gaurantee, perhaps it conflicts with his ECB shafted us narrative, though it does support his Crony democracy narrative, so why not mention it?
‘Irish labour costs are too high’ ‘job losses have been privatized’. Both points are true and both reflect policies of action or inaction, he could have mentioned that this is particularly and depressingly true for the young. He is right to highlight the pension bill, something the country will eventually have to tackle.
Though our representatives pay themselves far too much, which he’s right to point out, they don’t deserve digs like ‘brings the intellectual firepower of three secondary-school teachers and a trade unionist to bear on Ireland’s…’ in poor taste, mean and isn’t required to make his point.
Overall C.
Points deducted for no reference to the Guarantee, unnecessary attack, and his poor sums.
Points gained for being right/nearly right on key points of future pension bill, mortgage arrears crisis, the highlighting of public sector largesse and the unfairness of the privatisation of bank debt policy.
@ John Foody
The fact that Gilmore and Howlin are former trade union activists is very, very relevant, as is, the fact that we have a bunch of school teachers who got into politics running the country. They have no business experience no record of understanding what it takes to run a business have never had to find money outside of the exchequer to employ anyone. Their policies have been described as “economic apartheid” a description I happen to strongly agree with.
“As long as there are individual national budgets, I regard the assumption of joint liability as inappropriate and from our point of view this isn’t up for debate…The Spanish government will be liable for paying back the loans to recapitalize its banks. Plans to give the Euro rescue fund the power to inject cash directly into banks won’t be made retroactive.”
-German Chancellor Merkel
I believe her and the fig leaf has now been ripped away from the folly of the Croke Park deal and even a school teacher using basic arithmetic knows that cutting another 88 allowances is meaningless.
@tull
This more or less implies that you are optimistic about the country either achieving its official growth projections from now on, or getting really significant relief on the bank debt, or both. Which of these are you expecting to see?
From the Guardian Oct. 19th 2012
There has to be something useful in this varied list.
Economic policy
Alternatives to austerity: 10 ideas from across the political spectrum
From cutting middle-class benefits to making it easier to fire workers, here are some ideas for rescuing the economy
The Trades Union Congress march on Saturday is being held under the slogan “A Future that Works” as part of a campaign to force the government to consider alternatives to austerity measures. Here are some ideas from across the political spectrum.
1. Activist industrial policy
A version of picking winners, where the government backs certain sectors with significant funding support, whether direct grants or through an infrastructure bank. One clear example, already backed by successive governments, is aerospace. It could joined by, for instance, electric cars and tidal power.
Backers: Vince Cable, and Lord Adonis all favour a more dynamic industrial landscape.
Feasibility: high, if the government of the day can find the money and policies to back the underlying requirements. In the words of Lord Adonis, the following need prolonged backing: skills, technology, innovation, government procurement, infrastructure, finance, and supply chains. Picking winners is not as simple as it sounds.
Will it work? Yes, but this is a long-term strategy that requires political consensus, from changes to education policy to supporting industries that have long lead-times (civil aircraft programmes work on 30-40 year cycles, for instance).
2. Specialist banks
Create a state bank or a series of specialist banks, targeted at specific sectors. This could be a national infrastructure bank (for roads), a national green bank (for tidal power), regional banks (akin to the German Landesbank system) or a small to medium-sized business bank. This is a long and impractical wish list – setting up one bank is difficult enough – but Vince Cable, the business secretary, has already announced plans for a “business bank” that could leverage up to £10bn.
Backers: TUC, Cable, the Labour party.
Feasibility: high, but funding is the issue.
Will it work? It would need strict lending parameters, to prevent the Fannie-Mae-and-Freddie-Mac-style sprees that stoked the US housing boom.
3. Corporate governance overhaul
This would see more employees represented on management boards and remuneration committees in a way similar to the German stakeholder system. Lord Glasman, the Labour life peer, says it will harness the energy, skills and commitment of a workforce. “A third of the board should be reserved for capital, a third for the workforce and a third for users and local interests. This would enable the negotiation of a corporate strategy in which the good of the firm is owned by each of its principle stakeholders. Accountability is too important to be left to accountants. That is a fundamental lesson of the crash.”
Backers: Germany, Glasman.
Feasibility: low, because it is unlikely that the City, shareholders or companies would comply without legislation.
Will it work? Representatives would have to be put on Plc boards, not management boards, or companies would find a way around them.
4. Cut middle-class benefits to fund infrastructure spending
The Social Market Foundation (SMF), a thinktank, argues that benefits for the comparatively better-off should be cut and reinvested in infrastructure. Around £15bn could be raised by cutting free bus passes and television licences for some better-off pensioners, as well as halving higher-rate pension tax relief and axing child benefits for the top 50% of earners.
Backers: SMF. Ian Mulheirn, director of the SMF, says: “We are screaming out for infrastructure investment, but if we are worried about funding it with extra borrowing, then the answer is to cut middle-class benefits that do nothing for growth.”
Feasibility: medium. The Conservatives will not want to cut pension tax relief for a core segment of their voters. Labour and the Liberal Democrats would be more sympathetic.
Will it work? It would be a significant public spending cut and the funds could be leveraged, so it would definitely get projects started, although the boost would be medium- to long-term.
5. ‘Guerilla economic development’
An idea floated by Karel Williams and Sukhdev Johal from the CRESCCresc research centre at the University of Manchester. Under one example, local council pension funds would be used to build social housing. These houses would be built on terrain such as land banks compulsorily purchased from housing developers and retailers such as Tesco. Similarly, public assets could be put in public trust for use by the local community. The Conservative MP for Dover, Charlie Elphicke, is trying to buy Dover Port on behalf of the local population.
Backers: Karel Williams and Sukhdev Johal, Charlie Elphicke
Feasibility: taking land off Tesco is illegal, but compulsory purchasing orders offer a way around that. The Port of Dover faces fewer legal impediments.
Will it work? Again, success would be long-term but it would effectively devolve economic power to local councils and regions.
6. Adopt the full Beecroft report
The report into employment law by Adrian Beecroft, a venture capitalist, is viewed as something of a rightwing nuclear option. Elements of the report have been decried by Cable as “complete nonsense”, led by proposals to make it easier for firms to sack underperforming staff. Nonetheless, George Osborne’s suggestion that workers give up employment rights in exchange for shares is seen as a follow-up to the report.
Backers: Adrian Beecroft
Feasibility: unlikely because of the likely reaction of centrist voters and Liberal Democrats.
Will it work? The effect would be immediate but it could be unexpected – strikes, for instance.
7 Change the Bank of England inflation target to a nominal GDP growth target
Instead of focusing on a 2% inflation target, the monetary policy committee – which sets interest rates – could go for economic growth instead.
Backers: the US economist Scott Sumner.
Feasibility: the BoE would have to be convinced that it would not lead to spiralling inflation.
Will it work? If it resulted in GDP rising, the BoE would have to be vigilant to ensure that inflation did not wipe out the benefits.
8. The Alistair Darling plan
The plan of halving the economic deficit over four years – Labour’s 2010 general election policy – would have led to less stringent spending cuts than those envisaged under the coalition. George Osborne has targeted eliminating the deficit by 2015.
Backers: Darling.
Feasibility: nil, given the election result.
Will it work? If that plan had been put to the electorate now, the general election result might have been different. It would have taken less demand out of the economy too.
9. Relax immigration restrictions
Jonathan Portes at the National Institute of Economic and Social Research (NIESR) argues that the government should lower barriers to skilled immigrants from outside the European Union. He also argues that restrictions on non-EU students, and rules on their ability to secure jobs in the UK, should be relaxed.
Backers: NIESR.
Feasibility: unlikely under a government with Conservative leanings.
Will it work? NIESR’s ideas certainly get a sympathetic hearing from sections of the business community, which are crying out for skilled labour.
10. Tax increases
• The TUC is calling for a number of tax changes to raise income and reduce the impact of the recession on the less well-off. It wants to equalise the rates for income tax and capital gains tax, to restore the top rate of tax to 50p, introduce a “Robin Hood” tax on financial transactions and abolish the domicile rule that allows people to avoid UK tax.
Backers: TUC.
Feasibility: Osborne is not expected to reverse the reduction of the top tax rate from 45p to 50p.
Will it work? The Robin Hood tax, in particular, needs an international consensus that would be difficult to achieve. A 50p reversal would appeal to voters.
@ RB
The union connection is relevant, agreed, the lack of private sector experience among TDs is also something worth pointing out, however the suggestion that they have no ‘intellectual fire power’ BECAUSE of it or their background in education is to my mind wrong and suggests a kind of snobbery on his part.
It’s playing the man not the ball. Would he say Seán Lemass lacked ‘intellectual fire power’ due to his lack of a PHD?
Or to put it another way, one can have intellectual ability without holding a piece of paper from a university.
anonym,
Would that it were that simple. I do not you can lose sight of how this might end. On the “good” side, what is required for the periphery is a mix of fiscal tranfers, debt restructuring, easy monetary policy with a dash of non conventional policy otherwise known as QE. Otherwise the perihery defaults, the EZ dissolves and EU descends into an abyss for the third time in a century.
We seem to lurch between the two polls. Despite that the communtariat stays resolutely negative for the most part. I was genuinely optimistic after the Summer summit & Draghi’s victory over BUBA as I thought it ticked a lot of the boxes for a successful outcome. I suspected though that like any document agreed at 4am, some parties would endeavour to un-negotiate it. I guess that is happening right now.
Where do we go from here? The periphery has upheld its part of the bargain to a large extent. It is now up to the FANGs as to how they want this to end. If they backslide on the Summer agreement, Europe will plunge into the depths of a depression.
I love the way so many commentators these days have jumped on the mortgage arrears bandwagon as though it’s only just come to light and they are being some kind of prophet by saying it’s going to get worse.
It has been known within banking and government circles since 2009 that Ireland was going to have a mortgage arrears crisis but nobody has actually done anything about it because they don’t have an answer that doesn’t employ some radical thinking/actions……. and heaven forbid we should ever do something like that.
Isn’t there some old Chinese saying about the danger of taking a great leap forward is that you might tear your ball5 off?
@ All
The level of histrionics in the Sindo, and to a lesser extent in the Sunday Times, is really something!
As a counterpoint, the results of the recent MBRI poll for the Irish Times are worth drawing attention to.
“On the issue of whether the European Union will agree to a deal that will ease the burden of bank debt on the Republic, the poll shows that a majority of Irish voters are sceptical.
Asked for their opinion on the issue just 18 per cent of respondents said they believed the link between bank and sovereign debt would be broken, while 46 per cent said it would not and 36 per cent had no opinion.
Only Fine Gael voters had any degree of confidence that an agreement to ease the debt would be arrived at, while Labour voters were the most sceptical.
Farmers and the best-off AB social group were the most confident that a positive deal for the Republic would be achieved, while the poorest DE category were the most sceptical.
Men are twice as likely as women to believe that the European Union will ultimately do a good deal for the Republic and men are far less likely to answer don’t know in response to the question.”
The government would clearly get no prizes for its handling of the banking debt or other issues and the public are equally aware of this if the same opinion poll is any guide. A drop of 40% in approval ratings is hardly minor.
However, a real question has also to be asked of the media and commentariat. The level of parochialism and myopia in its coverage, with some notable exceptions, was brought home to me by this coverage in the Telegraph.
http://www.telegraph.co.uk/finance/financialcrisis/9621559/Debt-crisis-Merkel-blocks-eurozone-support-efforts.html
It may be that the plain people of Ireland have a better grasp of reality than many allow them. They are not critical of the government for taking difficult decisions but for failing to take any at all. A radical situation requires radical measures. The people seem to know this and will go along with them provide the burden is shared equitably. If the penny has not dropped with the government by now, it is unlikely to ever do so.
Meanwhile, on the evidence, the EU is moving towards some kind of overall deal between now and Christmas on the other aspects of the crisis. Will the bulk of the Irish media and commentariat even notice?
@ Robert Browne
Some fairly damning hyperbole are tossed around our Dail chamber on a daily basis but even the opposition know that when abroad they should be wearing the green flag. That doesn’t mean hide the truth, it means the tone of the message should be tempered. Eddie should have provided a much more balanced critique but then the WSJ readership revel in reading about the failure of Europe’s social model with references to WWII a real bonus.
Eddie has produced his trademark populist rant against public servants, bankers, politicians, trade unionists, Nazis and school teachers (I guess Eddie wasn’t a star pupil at school). But note how he avoids one of our elephants. Social Protection rates here are almost twice what they are north of the border. No populist dividend in slamming the OAP, so let’s avoid that one.
As an Irish citizen I would love to be forgiven some bank related debt as I would welcome any handout. I do not subscribe to the majority view on this blog that we have a moral claim to this largesse nor to the view that we are being oppressed by a latter day Third Reich.
What would worry me would be if any such gift were used to avoid the real running sore which is that the government are spending a billion a month more than they take in revenue. The government would love to use any handout to relax its requirement to address the real problem which is to confront the vested interests which Eddie has correctly identified.
@ Brian Woods II
I agree. Eddie is no saint but just because he used “populist methods” in his Rip off Ireland series does not mean he is not 95% correct in his WSJ piece. Did Bertie not use populist methods to get three terms in power? Sometimes hyperbole is useful and necessary as a tool I use it myself to counter out and out government propaganda much of which springs eternal from government departments and satellite quango’s including the ESRI who have produced little of value to solve this crisis. It is time for the one page solutions not the ‘erudite’ and clever use of statistics to obscure state failures and retard reforms.
Don’t pay anymore bonds,
End Croke Park.
Refuse to pay another red cent on Anglo promissory notes.
Bring in proper personal insolvency legislation which the banks have no control.
Insist that debt forgiveness is commensurate with state recapitalizations that have taken place.
I would have as a wider objective the revamping of the PS the HSE which is a law onto itself and our infamous Welfare system to make all theree fit for purpose.
On a more strategic level having left the stable door unlocked and realizing the horse has bolted, see how we can be as obstructive as possible henceforth in Europe as opposed to our policies of abject surrender.
@ Robert Browne
Isn’t that a rather inadequate respose to our being forced into Vichy style submission? Why not stop buying German cars, apologise to England for not supporting her in WWII and let’s stuff them 6-0 on our return World Cup match!
The morality argument is this:
Merkel has a duty to protect her citizens interests. She is doing this well. She is acting morally.
Our government has a duty to protect its citizens. It is not doing this. It is lying to itself and to us. It is turning us into a nation of craven beggars. That is amoral.
@tull
You’re right, there probably is a third possibility: that enough QE will keep the Irish sovereign-debt show on the road without any ‘PSI’, for an extended period. Don’t count on there being much left over for anyone else, though. This could be one of those be-careful-what-you-wish-for situations.
What exactly does “end/ditch/scrap CP” mean and how does it save a penny? If you mean “cut public sector nominal wages” then man up and say it. But cost it out….in full (in your answer refer to recent IMF shortrun multiplier analyses)….
oh, i forgot
Ceterum censeo IBRC delendam esse
@ Brian Woods II
“Isn’t that a rather inadequate respose to our being forced into Vichy style submission”?
Well who is it in Ireland that’s being forced into Vichy style submission and by whom? Plenty of people have said to me now is an ideal time to mop up a few properties and the repossessions that Gregory would like to see.
Personally, I have no difficulty with the bankrupt country we live in being forced to live within its means provided the burden is distributed and shared, We must resist red tooth and claw being taken for a fool and used as part of a ritual sacrifice by those who think that they can push the burden onto others just because they can cut deals from inside the system.
Also, it did not take much to “force” us into submission. We have not even seen the Trichet letter which must have been a very frightening diatribe. Truth is our leaders jumped into the bailout rather than force the issue. I think Damien Kiberd called the MOU “a surrender document”. Remember Morgan Kelly. ” for once the late Brian Lenihan was actually doing the right thing in saying we could survive to the middle of the following year” but then Honohan in his hotel room in Brussels thought ‘I must tell the Irish people what is going on, people would expect Patrick to tell them’ RTE were contacted and a requested slot on Morning Ireland.
It certainly does not take much to frighten the living daylights out of our public servants. Don’t tell them the ATM’s won’t pay out rather tell them their salaries will not be paid! Job done!
Looks like we’re now a ‘special case’
http://www.thejournal.ie/enda-kenny-merkel-joint-statement-644593-Oct2012/
@BL
Would a student referring to recent IMF fiscal multiplier analysis not have to be very careful not to fall into the trap of comparing apples with oranges without realising it?
Deciding the wisdom of cutting public spending or not is say, an apple.
If there is no flexibility available and the cuts have to be made anyway – say, under a Troika programme, shouldn’t the brighter students be expected to concentrate on the merits and multiplier effects or otherwise of cutting services in preference to cutting salaries? That might be a bit orangy.
re John Foody:’I’m also curious as to why he doesn’t mention the Gaurantee, perhaps it conflicts with his ECB shafted us narrative, though it does support his Crony democracy narrative, so why not mention it?’
I don’t know why he didn’t mention it either, but if anything it backs up the fact that the ECB ‘shafted’ us. There have been almost a dozen public ‘leaks’ by the people involved that the govt. were in consultation with eurozone finance ministers, and more specifically, received forceful pressure from Trichet that the banks were to be protected at ”all costs”. Only wilfull blindness can, at this stage, fail to identify this with the guarantee.
I’ve included a few links on the Colm McCarthy thread relevant to this – just what came to hand with little effort & by no means exhaustive.
@ Mark
I assure you im not wilfully blind, the Gaurantee was not 100% the ECBs doing, There is no evidence, that such a scope of a Guarantee was demanded, morever the poor policy decisions and inaction that preceded it was appauling…well, I suppose the ECB forced us to join the euro too? Perhaps if you were a little bit more ‘exhaustive’ you’d know better.
JF
– I certainly wasn’t referring to you when I wrote that.
But, anyway:
FF covering theirselves ? Maybe, but there are some telling remarks from 4.50: http://www.youtube.com/watch?v=WDN7NiEdNJ0
Was the guarantee solely the result of an emergency late-night meeting as was stated ? No: http://www.youtube.com/watch?v=vPR2Iwcpu4U
Did the ECB later prove that was capable of issuing threats to the country to force something like the guarantee ? Yes: http://namawinelake.wordpress.com/2012/01/09/ecb-refuses-to-hand-over-november-2010-threat-letter-sent-to-brian-lenihan/
How long did it take before the identity of the Anglo bondholders was admitted ? We had the smokescreen of goldencircles and developers for months.
Enda today : ‘Ireland had the European position imposed on it’ – specifically on the unguarnteed bonds, but…
I don’t believe that the ECB were unaware of the extent of liabilities held here, and if they say a threat to the eurozone financial system in the unsecured bonds, they certainly saw one in 2008
and despite their declared disapproval & ignorance of the guarantee – “To my knowledge everything was explained and discussed ex poste … If I remember well, it was at the end of the September 2008 when the Irish authorities – without notification here [in Brussels] – extended an unlimited guarantee to assets, also to creditors; and all those bondholders than can benefit from this unlimited guarantee, they are protected. This was not our decision … We were dealing the day after with how do you say – a fait accompli,” – within a month the ECB were advocating similar bank guarantees for the rest of eurozone members ;
“With a view to complementing the actions taken by the ECB in the interbank money market, the Governments of the Euro Area are ready to take proper action in a concerted and coordinated manner to improve market functioning over longer term maturities. The objective of such initiatives should be to address funding problems of liquidity constrained solvent banks. […] To this aim, Governments would make available for an interim period and on appropriate commercial terms, directly or indirectly, a Government guarantee, insurance, or other similar arrangements of new medium-term (up to 5 years) bank senior debt issuance
http://www.ecb.int/pub/pdf/other/recommendations_on_guaranteesen.pdf
Later, they approved & encouraged it’s extension.
I note that there is a position held by the left that the subsequent fingering of the ECB that I hold to is a self-preserving revisionism; eg; Irish Left Review: ‘
”It’s one thing for the Irish moneyed class to say that the ECB forced them into the 2008 bank guarantee, it’s another for progressives/leftists to fall for it.”
But we’ve here a political grouping that is would rather a european solution than the danger of a native corruption manipulating some popular nationalism in order to survive.
It’s not a case of either/or when attributing blame or cause, though
I could have cut to the chase
– the bank execs did not benefit by the extension of a guarantee to cover their creditor’s losses. But is implied in the Trichet mandate ‘at all costs’, and the beneficiaries were and are the financial institutions of Ireland.
‘…were and are the financial institutions of EUROPE.’
I need some sleep.
@ Robert Browne
Constantin Gurdgiev out forecasted the whole of the Dept of Finance throughout the crisis but had to do with appearances on Vincent Browne to get his points across. And of course the usual public sector carping and sniping and wink, wink nod, nod made sure that his career path would be… let’s just say ‘difficult”.
There are political opinions (despite claims, “political economy” is full of them) and associations that I might suggest would be perhaps more representative of reasons why one C. Gurdgiev might possibly have been given a wide berth by institutions here.
@ EWI
The man is still worth multiples of his peers and that of course is his main problem. Talent is seen as a grave threat to the inadequate and weak. Who was it that said we suffered from “group think”? Oh! they all said it! We must not suffer from “group think” then, having got that out of the way, they go back to group think because that is all what they are most comfortable with. It’s also the alpha and the omega of how you “get ahead’.
At least Mr. Gurdgiev is not the type who gets sick in the pit of his stomach coming in to work, by train, to the DoF everyday, to advise the minister for finance. We would not be in the position we are in today if we had not isolated Kelly, Gurdgiev and even Matthews (used electorally then isolated) but that is what we do here in this country. When we cannot refute or disprove, we take the easier option of shunning and whispering, then later, bowing and scraping to our new masters. We are dependent now on “the kindness of strangers” and that is apparent like never before in recent days.
Give me a Gurdgiev any day of the week I don’t care who he associates with and I am quite sure he will be having the last laugh.
Robert Browne is spot on, as usual.
The banking weapon was used by the English/Venetians against Catholic Royalist France, using the proven talent of John Law.
Ireland continues to lose population, a trend started after the Famine.