Archive for December, 2012

Carbon Taxes Make Ireland Even Greener

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Friday, December 28th, 2012

NYT article here.

Irish Economy Conference February 1st at the Institute of Bankers

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Saturday, December 22nd, 2012

Save the date. On February 1st 2013, the DEW in conjunction with ESRI, UL and the UCD Geary Institute is hosting a conference on Irish economy policy in the Institute of Bankers Headquarters in Dublin. Frances Ruane, Liam Delaney and I are organising a conference for the general public on the Irish economy, much in the same vein as last year’s. Admission will be free but limited by the capacity of the rooms. To register for the conference, please email: emma.barron@ucd.ie

The main theme of the conference will be to explore how economic policy could be developed to enable substantial development even in the context of a tightened fiscal and monetary environment.

The conference will have parallel sessions addressing Unemployment, Political Economy, Economics and Evaluation, Education and Children, Industrial Policy, Healthcare, and Ireland’s macroeconomic outlook. We’ll announce a full lineup early in the new year.

The conference aims to provide a forum for discussion of new ideas on the conduct of Irish economic policy, including the extent to which academic economics and related disciplines can make a bigger contribution to the conduct of economic policy in Ireland, and the extent to which policy can be designed more effectively. The speakers will come from a range of sectors and disciplines and we will also ensure that individuals have access to talks online to enable debate through blogs and twitter.

Central Bank: Explaining Irish Inflation during the Financial Crisis

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Thursday, December 20th, 2012

technical paper here; letter here.

God Save the British Economy

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Thursday, December 20th, 2012

here.

Ireland: Eighth Review Under the Extended Arrangement; Staff Report; Staff Supplements; and Press Release on the Executive Board discussion

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Wednesday, December 19th, 2012

here.

See also the new IMF site for Ireland – here.

New EU Reports: Current Account Surpluses; Fiscal Sustainability

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Wednesday, December 19th, 2012

here and here.

FT Editorial: Let Ireland Succeed

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Wednesday, December 19th, 2012

here.

The future of financial globalisation

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Tuesday, December 18th, 2012

The revised versions of the papers presented at the BIS Annual Conference are now available:

The papers presented at the conference and the discussants’ comments are released as BIS Working Papers 397 to 400:
Financial Globalisation and the Crisis, BIS Working Papers No 397
by  Philip R. Lane
Comments by Dani Rodrik

The great leveraging, BIS Working Papers No 398
by  Alan M. Taylor
Comments by Barry Eichengreen and Dr. Y V Reddy

Global safe assets, BIS Working Papers No 399
by Pierre-Olivier Gourinchas and Olivier Jeanne
Comments by Peter R Fisher and Fabrizio Saccomanni

Capital Flows and the Risk-Taking Channel of Monetary Policy, BIS Working Papers No 400
by Valentina Bruno and Hyun Song Shin
Comments by Lars E O Svensson and John B Taylor

Q3 National Accounts; Q3 BOP

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Tuesday, December 18th, 2012

here and here.

Update on Ireland

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Tuesday, December 18th, 2012
  • FT interview with Enda Kenny here.
  • IMF Completes Eighth Review Under the Extended Fund Facility with Ireland and Approves €0.89 billion Disbursement. Press release here.

Update on Greece

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Tuesday, December 18th, 2012

A long WSJ article on the individual hardships currently experienced by the Greek population is here.

Also new from the European Commission:

The Second Economic Adjustment Programme for Greece – First Review December 2012

Central Bank Economic Letter: Ireland’s External Debt: Economic and Statistical Realities – Conn Creedon, Trevor Fitzpatrick and Edward Gaffney

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Tuesday, December 18th, 2012

Available here.

ECB Financial Stability Review

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Monday, December 17th, 2012

Lots of comparative data and analysis across the eurosystem -  available here.

A Rescued Comment

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Friday, December 14th, 2012

Too good to miss . . .

Re Box 6, By Gavin Kostick

[Scene: A spacious drawing room in Frankfurt. A patient is strapped to a table. M Drachet in attendance, plus admirers]

M Drachet: Our diagnosis for this fellow is an excess of partying, too much of the punch-bowl, a surfeit of humours, grass corpulence and a palpable debt overhang. Our remedy? Leeches!

[Enter Mr deKrugman, a plain talking Yankee]

Mr deKrugman: Hold your hand, sir! The patient is week. Leeches will only distress his condition further.

M Drachet: Oh that annoying fellow. Even your fellow Americans agree that leeches are the cure.

Mr deKrugman: Not any more they don’t. They’ve changed their minds.

M Drachet: Really? Never mind – bring on the leeches.

Mr deKrugman: Rather than leeches, this fellow needs an infusion of fresh blood to recover.

M Drachet: Are you volunteering?

Mr deKrugman: You, sir, can create all the blood you wish and you know it.

M Drachet: Balderdash.

[A fop whispers in M Drachet's ear]

M Drachet: Well that’s news. But you forget, our medical charter expressly forbids it. And you miss the nicer point, if we were to do so, this fellow would learn nothing from his foolishness and return to his profligate ways.

Mr deKrugman: Are you trying to cure the fellow, or teach him a lesson?

M Drachet: A soupcon of A and a morsel of B. Now, the leeches.

[The leeches are applied, and the patient becomes noticeably paler]

Mr deKrugman: Told you.

M Drachet: You really are the most arrogant fellow.

Mr deKrugman: Says the man with the leeches.

M Drachet: But this is part of the cure! You see he is being purged, in in being purged he will ultimately return stronger.

Mr deKrugman: Or dead like that poor Greek fellow.

M Drachet: And anyway, you quite misunderstand. It is not the leeches that make him pale, but, er, that, that and la bas!

Mr deKrugman: You’re pointing at a bunch of random things.

M Drachet: Not at all, I’m pointing at fetid air! Contagion I tell you. Stop looking at the leeches.

Mr deKrugman. Look, are the leeches to teach a painful lesson or to help the patient get better?

M Drachet: Can they be both?

Mr deKrugman: No.

M Drachet: To be honest monsieur, we do it because we’ve always done it.
But our meticulous research shows that if the patients have, er, died in the past – it wasn’t the leeches fault! It was, um, something else!

Mr deKrugman: I strongly recommend an infusion of fresh blood.

M Drachet: But if we tried something new and it proved better, why our reputation for competence would be in tatters – you laugh sir?

Mr deKrugman: No sir, I weep. I weep.

[They continue to bicker as the bloated leeches suck happily at the patient]

Mortgage Arrears Statistics

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Thursday, December 13th, 2012

The Central Bank have released the Q3 2012 update of the Mortgage Arrears Statistics.  The arrears situation continues to deteriorate.  There is some useful new information in this release.  On owner-occupier loans a further breakdown is given of loans that are more than 180 days in arrears.  This is the number of accounts in each sub-category:

  • In arrears 181 to 360 days:  23,035
  • In arrears 361 to 720 days: 24,825
  • In arrears over 720 days: 19,541

The accounts in the final category are an average of €40,000 behind on their repayments.  Loans in arrears over 90 days are now equal to 15.1% of the total balance of owner-occupier mortgages.  The total stock of owner-occupier mortgages has declined from €118.6 billion in Q3 2009 to €111.2 billion in Q3 2012.

Some additional forbearance measures are added to the list usually provided.  These are for a permanent interest rate reduction and a split mortgage but the numbers of these provided remain small at 194 and 12 respectively.  Of the 153 owner-occupied properties repossessed during the quarter 70 per cent were by way of a voluntary surrender.

Details are also provided on buy-to-let loans for the first time.  A spreadsheet with the data for both loan types is available here.

Another box on fiscal multipliers: ECB December Bulletin

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Thursday, December 13th, 2012

See Box 6 in the latest monthly bulletin – here.

Banking Union; Schauble op-ed

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Thursday, December 13th, 2012

FT reports on progress in the banking union talks – here.

Wolfgang Schauble has an op-ed in the WSJ  – here.

Work and Poverty in Ireland

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Tuesday, December 11th, 2012

A new report commissioned by the Department of Social Protection and undertaken by the ESRI is available here

The focus of the report is on the very low work intensity (VLWI) measure of social exclusion with which Ireland is a significant outlier.  In Ireland 22.8% of people under 60 live in households with very low work intensity compared to an EU27 average of 10%.  The report looks at the trend in this measure over time and the characteristics of households that comprise this group. 

Notes from the continent where good times are always just around the corner

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Monday, December 10th, 2012

The markets are going into a minor tizzy this morning thanks to the news that Mario Monti is stepping down earlier than expected. And I can certainly understand why people like Beppe Grillo and Silvio Berlusconi might seem like a cause for alarm.

But what if Wolfgang Münchau is right, and the real problem in Italy right now is the austerity policies that Monti is pursuing, and that are being praised to the skies by the entire European establishment as we speak? Bang on cue, we learned this morning that Italian industrial output fell by 1.1% in October, much faster than expected. If Wolfgang is right, then what Europhiles (and the markets) should be devoutly hoping for is centrist, Europhile politicians willing to reject the status quo policies that are doing such damage. Why should Eurosceptics have all the best tunes?

One of the things that makes it possible for Europe’s politicians to persist with this nonsense is their conviction, like Mr Micawber, that something will turn up. There is no sign in Ireland that anything at all is turning up. The most important indicator of all, employment, is still falling, and you can see signs of strain all around if you care to look. At the panto last night, I was struck by the lack of sparkly fairy wands, light sabres, and all the rest compared with previous years: it really was very noticeable. And these were the people who could still afford to take their kids to the panto. Also noticeable was the almost complete absence of recession jokes, which were such a feature in 2008 and 2009. It just isn’t funny any more.

Colm McCarthy was in good form yesterday regarding this over-optimism in the Irish context. Of course, it is always possible that predictions of rapid growth just around the corner aren’t fuelled by optimism at all. It is at least theoretically possible that these growth predictions are whatever is required to make Ireland — the Eurozone’s supposed success story — seem solvent.

Mind you, you’d have to be a complete cynic to believe that such a thing was possible.

Update: Good Heavens Above. The corner appears to be receding from view in the Netherlands.

Doha

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Monday, December 10th, 2012

As predicted, the 18th Conference of the Parties to the United Nations Framework Convention on Climate Change did not bring much, despite the arduous effort of most of the 17,000 delegates in Doha. The Doha Gateway Package promises that a new treaty will be negotiated by 2015. The 2007 Bali Roadmap promised the same, only to fail two years later in Cancun. I predict that the Paris negotiations will not deliver either.

Doha did extend the Kyoto Protocol from 2015 (as agreed in Durban) to 2020. The Kyoto Protocol is now a European affair, with Australia as an honorary member. The emissions targets agreed in Doha are the same as the targets adopted a long time ago in Brussels.

Doha did agree to end the twin-track negotiations, with one track for Europe to do what it wants and another for the rest of world to be in deadlock. Europe will join the deadlock so.

At the moment, donor countries divert development assistance to climate aid, meant to reduce overseas emissions and help poor countries adapt to climate change. (By the way, development assistance also pays for the international travel of Ireland’s climate negotiators.) In Doha, there was much talk of changing these voluntary contributions to mandatory ones, based on some form of accountability.

Needless to say, the USA are dead against any admission of liability. China’s position will rapidly change once they realize that they are the greatest contributor to climate change since 1992, when climate change was internationally recognized as a problem.

Today’s editorial in the Irish Times paints a different picture. However, the EU did not take on further commitments to reduce emissions. Sandy and Bopha cannot be attributed, either physically or statistically, to climate change.

The Irish Times also calls for a Climate Bill. Draft Bills would have created new bureaucracies, but would not have contributed to emission reduction (as argued here and here).

Climate policy does not need bureaucrats. A carbon tax would work just fine. I was therefore pleased that as of Budget2(0)13 solid fuels will no longer be exempted from the carbon tax. Let’s hope that the fiscal problems elsewhere will force other countries to follow Ireland’s example and introduce a carbon tax too. It would be even better if austerity would cull the excessive numbers of climocrats.

Resolving Globally Active, Systemically Important Financial Institutions

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Monday, December 10th, 2012

This joint FDIC/BoE paper is here.

BIS Quarterly Review, December 2012

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Sunday, December 9th, 2012

available here.

Minister Pat Rabbitte: Ireland won’t pay the 3.1 billion promissory note in March.

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Sunday, December 9th, 2012

Details here. From the piece:

Communications Minister Pat Rabbitte has said that the country will not pay the €3.1bn promissory note for former Anglo Irish Bank when it is due in March.

He told RTÉ’s The Week in Politics that the Government can not pay this “IOU” entered into by the last Government after the collapse of Anglo Irish Bank.

He said the European Central Bank was a difficult institution to “bring around” to stamping the deal Ireland needs on the promissory note.

But Minister Rabbitte said he believes it will happen before the payment is due next March.

Was planning on having an early night, but it’s #twip all the way now.

Your thoughts, most distinguished commenters?

Coase versus Pigou and Eurozone Bank Resolution Policy

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Friday, December 7th, 2012

Brian O’Kelly and I have a new policy paper on Eurozone bank resolution; it is in the Special Papers series produced by the Financial Markets Group at LSE.

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Competitiveness and external imbalances within the euro area

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Friday, December 7th, 2012

A new ECB OP on this topic is here.

Value-added exchange rates

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Thursday, December 6th, 2012

This alternative approach to measuring exchange rates is especially relevant for Ireland, in view of the high gross exports/imports of the foreign-dominated sectors.

Budget 2013

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Wednesday, December 5th, 2012

files here.

Misrepresenting ‘at-risk-of-poverty’ statistics

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Wednesday, December 5th, 2012

Writing in today’s Irish Times Vincent Browne says:

On Monday last, Eurostat published its latest report on poverty and social exclusion. It showed that for the EU as a whole the at-risk-of-poverty rate was 24 per cent, but for Ireland, it was almost 30 per cent. Only three other countries in the EU 27 had a higher at-risk-of-poverty rate: Latvia, Lithuania and Romania.

This is the 2011 Eurostat press release on social exclusion and at-risk-of-poverty rates.  The first thing to note is that is contains no figure on the at risk-of-poverty rate in Ireland for any year.  It does contain 2010 data that gives the sum of the following three measures for each country.

  • Persons at-risk-of-poverty after social transfers
  • Persons severely materially deprived
  • Persons aged 0-59 living in households with very low work intensity

From the report there is no way of knowing how much of the 29.9% figure for Ireland (the joint fourth highest in the EU) is attributable to each category.

We have 2010 data on the at-risk-of-poverty rate.  The table from page 77 of the CSO’s 2010 EU-SILC publication released in March of this year is below the fold.

The three average figures provided for the at-risk-of-poverty rates in 2010 are:

  • EU-27: 16.4%
  • EU-15: 16.2%
  • Eurozone: 16.1%

The 2010 figure for Ireland is 16.1%.  This is lower than the EU27 and EU15 averages and equal to the Eurozone average.  Bulgaria, Greece, Spain, Italy, Cyprus, Latvia, Lithuania, Poland, Portugal, Romania and the United Kingdom all had a higher at-risk-of-poverty rates than Ireland.

In the same table it can also be seen that Ireland has the second-highest at-risk-of-poverty rate excluding all social transfers, well above all the EU averages.  The distribution of cash benefits improves Ireland’s ranking from 26th in the EU27 to 16th, with an at-risk-of-poverty rate below the EU27 average.

In 2010, the at risk-of-poverty rate in Ireland for people aged under 60 in households with very low work intensity was 38.8%.  The EU27 average was 56.9%.  Ireland’s at-risk-of-poverty rate for households with very low work intensity was the second lowest in the EU. Only the Netherlands at 36.7% had a lower rate in this category.  A table of these figures taken from Eurostat is also below the fold.

In 2010, the percentage of people aged under 60 living in households with very low work intensity was 22.8%.  the EU27 average was 10.0%.  Ireland’s rate on this measure was the highest in the EU, by a distance.  The next highest rate was in the UK at 13.1%.  These are also provided in the second table below.

Conclusion for 2010: Ireland has lots of people who live in households with very low work intensity.  Just over a third of these are at-risk-of-poverty, compared to nearly 60% in the EU.  Ireland’s at risk-of-poverty rate is below the EU27 average.

The 30% figure cited in today’s Irish Times is because Ireland has an very high number of households with low work intensity, not because Ireland has a high at-risk-of-poverty rate.  Ireland’s cash benefits system does more for people living in households with low work intensity than almost any EU country.  It is a pity the readers of the paper won’t know this.

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Interpreting TARGET2 balances

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Tuesday, December 4th, 2012

A new BIS paper on this topic is available here.

November Exchequer Statement

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Tuesday, December 4th, 2012

The Exchequer Statement for November has been published by the Department of Finance.  The shortfall in taxation flagged in the White Paper is clearly visible in the Analysis of Tax Receipts and is further explained in the Information Note accompanying the return.  Income Tax was €300 million (12.1%) below the monthly target.  There is also an Analysis of Net Voted Expenditure.

The new Analytical Statement is an addition to the monthly information presented by the Department of Finance.