This entry was posted
on Wednesday, December 19th, 2012 at 5:14 pm and is filed under Uncategorized.
You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.
53 Responses to “Ireland: Eighth Review Under the Extended Arrangement; Staff Report; Staff Supplements; and Press Release on the Executive Board discussion”
Will they now please stop calling this place Ireland now….
It has no political significance.
We can call it Eurasian island number 3 , maybe airstrip 2 or something
We can then engage in our Mad Maoist Monk export drive with a clean conscience.
The purpose of a economy is export
The purpose of a economy is export
The purpose of a economy is export
We must engage in pointless competitive drives
We must engage in pointless competitive drives
We must engage in pointless competitive drives.
I find it amazing the inner party has kept Eurasia in one piece given the crap nature of their propaganda.
But how do they do it in Ireland given its ever more extreme nature?
Don’t answer that question………….
Although maybe its because the local outer party is so thick in Ireland. (full of cute hoors which only know how to extract from the proles and nothing else)
A gravy train when compared with the Icelanders I imagine
Airstrip 2 which just keeps on giving away its surplus for not even a hint of a return
“In order to deepen Ireland’s market access, discussions focused on policy actions
to support confidence that key fiscal, financial sector, and growth challenges are being
addressed. Key issues for the review are Budget 2013—a prior action for completion—and
the update of the medium-term fiscal consolidation plan. In the financial sector, the focus is
on implementation of steps to arrest the deterioration in asset quality and reinforcing PCAR
banks efforts to restore profitability and support the ongoing recovery. Discussions on
structural reforms focused on job creation and containing structural unemployment”
Dork – The modern markets function by giving us a oil ration we do not need to buy shit we should not want.
We need national currency unit to employ people before we go running to the markets for a oil ration.
Structural unemployment is caused by capital displacing labour over a long enough time period.
As not all of us can become members of the fourth & financial estate.
The medium-term consolidation path set out in the MTFS is appropriate and
effective implementation of the structural reforms needed to underpin this path will be
paramount. Given the still-fragile recovery, undertaking additional consolidation in 2013 is
not favored if growth should prove to be weaker than projected, especially as Ireland‘s fiscal
multipliers—which are expected to be lower than average given the highly open economy—
MAYBE HIGHER THEN TYPICAL OWING TO LIMITED CREDIT AVAILABILITY. Hence, a flexible approach is
preferred regarding the path toward the 2015 deficit target, such as by deferring any
significant additional consolidation to 2015 where the adjustment burden is lighter. Such
flexibility will have a marginal impact on debt sustainability but entail substantial benefits for
the political feasibility and credibility of consolidation. At the same time, staff urges vigilance
in ensuring the efficacy of structural reforms to underpin durable expenditure savings,
especially in the health sector, to protect confidence in the medium-term consolidation goals………..
Dork – so there is elements of not so much MMT but very basic economics creeping into their discussion although it is very very simple stuff.
These jackals still wish to kill your mother but not just yet.
Its a cars vs people debate in my book.
I know where I stand on this.
The primary balance could have easily been achieved if we had a sov currency and a post war Norwegian type transport policy
Without the need to liquidate labour.
We need to get out of Europe though
They Soviet is fining us for septic tank stuff again today.
Keep in mind their 1970s agricultural policy and post 1987 credit hyperinflation did more damage to the envoirment then any dumb hick from the midlands could ever hope to achieve.
The IMF presentation is in many ways much more usefu that the murky Budget documents from the DoF.
Real current govt spending is due to fall (excl interest payments) by 4.7% in 2013 from 2012. The compares to a fall of 2% in real terms in 2012.
Current transfers arising from increased poverty and unemployment have increased, so curbing the fall in nominal current spending has been difficult. Deflation in 2008 to 2010 means real current govt spending has actually risen over the entire period.
But with 3.4% nominal cuts combining with forecast inflation of 1.3% then either the real effects of cuts will be much tougher than previously. Or they will prove very difficult to realise. Or some combination of the two.
“Delivery on European commitments, especially direct bank recapitalisation, is critical,” it said. Doing so “would sever the sovereign’s exposure to contingent liabilities from the banks, reduce public debt directly, resuscitate bank funding conditions and help revive domestic credit and economic growth, and thus underpin successful exit”. [IMF]
Thinly veiled criticism
It also made thinly veiled criticisms of European institutions and euro-zone member states for failing to live up to commitments made earlier in the year, most notably at the June 29th EU summit when they committed to breaking the link between banks and sovereigns by, among other means, the use of their new collective permanent bailout fund, the European Stability Mechanism.
… Speaking from IMF headquarters in Washington DC yesterday, mission head to Ireland Craig Beaumont said he would “hope and encourage” a deal with European authorities on restructuring the promissory note by next March, when principal and interest payments on it fall due.
Around 60% of unemployed have been so for more than a year. One third of youths in the workforce are unemployed.
Without emigration the unemployment rate would be 20%.
Inflation for the first ten months was 2% largely driven by energy prices.
There is a good analysis of mortgage arrears.
Bank lending is banjaxed.
SME loans down 20.7 y.o.y for the first six months of 2012.
Domestic banks have high and rising impaired assets and remain unprofitable , which is eroding their strong capital buffers.
Ireland’s health spending is one of the highest in the OECD but health outcomes are near average.
Use of generics at 20% is second lowest in OECD.
Financial reform benefits. In the wake of an exceptionally deep financial crisis, with impacts across the system, financial sector reform challenges remain substantial, and there is uncertainty around the timing and magnitude of the benefits of financial sector
reforms for reviving banks‘ profitability and capacity to lend to households and SMEs.
Debt overhangs. Government debt is set to peak at some 122 percent of GDP, household debt is 209 percent of disposable income, and many SMEs are burdened by property-related loans. These debts drag on growth through private deleveraging, reduced access to credit at higher cost, and concerns about future tax burdens.
Bank-sovereign loop. These debt stocks are compounded by still large contingent liabilities from the banking system in a scenario where weak growth reduces asset values and heightens loan losses. As a result, the challenges for sovereign and banks in accessing market funding are interlocked, magnifying the growth uncertainties.
Fiscal drag. Fiscal consolidation will continue to be significant in coming years, with the growth impact depending on the composition of measures and also on external economic conditions and progress in easing credit constraints.
These risks to growth have profound adverse implications for debt sustainability
In these circumstances, Ireland’s market access is fragile, and relies crucially on the strength of program implementation, together with forceful delivery on European commitments.
In their updated MTFS, the authorities have reaffirmed their consolidation effort
of €8.6 billion (5 percent of GDP) in 2013–15 (MEFP ¶4–6). The consolidation will continue to be led by current spending, but with revenues contributing close to 40 percent of the savings.
On the current expenditure side, the authorities plan to reduce spending on universal social benefits (e.g., child benefit) and subsidies (e.g., tertiary education), with effective means-tested offsets for welfare recipients and low-income earners. *Also under review are options to address the significant fiscal implications of population ageing, as highlighted in the recent actuarial review of the Social Insurance Fund. In relation to public pay—which includes a significant premium over private sector pay (Box 3)— the authorities have begun to engage with public sector unions to secure signif icant additional wage and pension bill savings in the period to 2015, including through additional structural productivity reforms relating to hours worked. Together with plans to cut personnel numbers by another 3½ percent over the next two years,these measures will deliver significant public wage bill reductions.
*emigration is not ideal in this context, neither is 35% youth unemployment
PCAR banks‘ NPL ratio of 23.1 percent compares with 9.6 percent in Spain (***Espana, el pobrecito***) , even after a substantial amount of problem assets had already been transferred to NAMA.
Progress on the supporting infrastructure is essential to make the new personal
insolvency framework operational in early 2013. A recently appointed Director Designate has been tasked with setting up an Insolvency Service to administer the new framework. Among its initial tasks, the information campaign for all parties concerned with the new framework will be particularly important. In the context of debt relief notices, it will issue guidelines for reasonable household expenditures for debtors, which may usefully inform the
broader range of out-of-court arrangements.
Reform of the personal insolvency regime should be complemented by an
effective repossessions process to facilitate durable loan resolution. The number of repossessions in Ireland is very low by international standards, and proceedings often take over a year, although recently banks have intensified collection efforts on investment properties by appointing rent receivers. The authorities will introduce legislation by end March 2013 to address issues identified by case law in repossessions
To help reduce unemployment over time, the authorities are stepping up a range of reforms (MEFP ¶23). In particular the authorities are advancing:
Engagement with the long-term unemployed. In October, the authorities launched a new one-stop shop unemployment support service, operating on the basis that welfare payments are contingent upon participation in activation programs and active job search. Importantly, the authorities are taking steps to enhance engagement with the
long-term unemployed through these one-stop shops, the Local Employment Services Network, and other schemes. Involvement of the private sector in providing employment services is expected to be operational by end-2013, and it is important to stay on schedule given the high share of long-term unemployed and shortages of
qualified case workers.
Further education reform. In October, the authorities published new legislation to reform the organization of further education, and by the end of the year they will publish legislation to establish a central institution that will coordinate and fund training and further education programs. Timely implementation of these reforms is needed to ensure
courses are in line with labor market needs to facilitate cross-sectoral mobility of unemployed persons, including those with lower initial educational attainment.
Housing assistance reform. Recognizing employment disincentives that may arise from the current rent supplement, the authorities are establishing a new Housing Assistance Payment, where the amount of individual contribution will depend on the level of income and not the employment status, hence improving incentives to take up employment. Necessary legislative amendments will be made in the first half of 2013, and the program will be piloted in the second half of the year, to be fully operational
as of January 2014.
Source of drag Impact on Bank net revenue as % net assets
High deposit funding costs -0.3
Foregone interest income on NPLs -0.4
o/w: non-cash income recorded on impaired loans -0.3
Tracker mortgages -0.4
Excess operating costs -0.4
ELG fees -0.4
Risks around medium-term growth prospects are a key source of
fragility in Ireland‘s debt sustainability, in part because prolonged low growth could result in new capital needs in the financial sector.
The reforms of personal insolvency will provide new opportunities for out-of-court resolution of household debt distress, and it is essential that these reforms be complemented by a well functioning repossession process to maintain debt service discipline through the workout process. Continued efforts to lower funding costs, including by orderly withdrawal of the ELG
scheme and steps to reduce operational costs are essential, yet breaking the bank-sovereign loop would have the greatest benefit for strengthening profitability and lending capacity.
Continued strong policy implementation is essential, yet timely exit from official
support cannot be assured without forceful delivery of European pledges. Ireland is on track to deliver the full fiscal consolidation, bank recapitalization and deleveraging, and structural reforms envisaged under the program. However, weak external demand and internal hurdles have slowed growth and also cast uncertainties around medium-term recovery prospects. The resulting risks to debt dynamics are magnified by the sensitivity of financial sector health to growth trends in view of high private debt burdens. In this context, market doubts about debt sustainability could easily reemerge, undermining the availability of the substantial market financing needed and resulting in prolonged dependence on official support. The most definitive way to forestall such a scenario would be through decisive direct bank recapitalization by the ESM, which would reduce public debt directly and insulate the sovereign from potential contingent liabilities from the banking sector. The risk of such liabilities arising would be greatly reduced, as breaking the bank-sovereign loop and debt overhangs in this manner would improve prospects for domestic demand recovery, including by enhancing bank funding conditions. The way forward is clear.
The recent compression of Ireland’s sovereign bond spreads has not been
associated with any credit rating upgrades. During 2010-11, ratings downgrades and Irish bond spread widening broadly moved together. But there have been no upgrades since spreads began narrowing from mid-2011, with ratings agencies appearing to take a more cautious approach regarding announcements of European policy actions.
The Fund seems to have little confidence in the sustainability of Irish growth without an easing of the debt burden by Europe.
The report says that net exports are “still the sole engine of growth” and unsaid is likely the knowledge that most of the services growth in recent years is not real.
On generics, I think we’re just ahead of Greece where doctors were given bribes to prescribe originals.
Ireland‘s share of public compensation in government expenditure and the ratio of average public pay to per capita GNP (gross national product) are among the highest among the 34 mainly developed country members of the OECD . OECD‘s at-a-glance reports on the government sector and on education and health find that public pay in Ireland is elevated, especially for school teachers and medical professionals.
“Bank-sovereign loop. These debt stocks are compounded by still large contingent liabilities from the banking system in a scenario where weak growth reduces asset values and heightens loan losses. As a result, the challenges for sovereign and banks in accessing market funding are interlocked, magnifying the growth uncertainties.”
But we have to stop the ELG scheme to make the banks profitable again!
“its the right call” (Secretary of DOF).
The latest news (unconfirmed) is that Monti will stand for election and that Asmussen, according to the FAZ (HT Eurointelligence), thinks that the proposed bank resolution fund should be run by the ESM as an introduction to a situation where the banks are effectively funding it themselves.
For reference, the relevant paragraphs in the conclusions of the European Council.
“8. The European Council urges the co-legislators to agree on the proposals for a Recovery and Resolution Directive and for a Deposit Guarantee Scheme Directive before June 2013; the Council for its part should reach agreement by the end of March 2013. Once adopted, these Directives should be implemented by the Member States as a matter of priority.
10. It is imperative to break the vicious circle between banks and sovereigns. Further to the June 2012 euro area Summit statement and the October 2012 European Council conclusions, an operational framework, including the definition of legacy assets, should be agreed as soon as
possible in the first semester of 2013, so that when an effective single supervisory mechanism is established, the European Stability Mechanism will, following a regular decision, have the possibility to recapitalise banks directly. This will be done in full compliance with the Single Market.
11. In a context where bank supervision is effectively moved to a single supervisory mechanism, a single resolution mechanism will be required, with the necessary powers to ensure that any bank in participating Member States can be resolved with the appropriate tools. Therefore,
work on the proposals for a Recovery and Resolution Directive and for a Deposit Guarantee Scheme Directive should be accelerated so that they can be adopted in line with paragraph 8. In these matters, it is important to ensure a fair balance between home and host countries. The Commission will submit in the course of 2013 a proposal for a single resolution mechanism for Member States participating in the SSM, to be examined by the co-legislators as a matter of priority with the intention of adopting it during the current parliamentary cycle. It should safeguard financial stability and ensure an effective framework for resolving financial
institutions while protecting taxpayers in the context of banking crises. The single resolution mechanism should be based on contributions by the financial sector itself and include appropriate and effective backstop arrangements. This backstop should be fiscally neutral over the medium term, by ensuring that public assistance is recouped by means of ex post
levies on the financial industry.”
The stark dependence on growth stands out. Stagnant growth, as discussed at item 16 on page 11 /12, results in a scary forward projection of debt /GDP rising well above 130%. However, “Net exports, still the sole engine of growth, are naturally sensitive to any further weakening in trading partner activity.”
No /stagnant growth = very grim future. Note how pivital 2013 is in the graph at the top of page 12. Yet the whole ‘plan’ assumes robust (albeit revised don) growth figures over over the next years “Projections for Ireland‘s GDP growth in the next two years have been revised down by 0.3 percentage points to 1.1 percent in 2013 and 2.2 percent in 2014.” That despite “Growth in real GDP is expected to be low, at just under ½ percent in 2012, but is till subject to uncertainty given recent mixed signals.”
Euro-zone member state Cyprus badly needs a bailout, but the International Monetary Fund is demanding a debt haircut first, according to media reports. The resulting standoff with Europe has delayed the country’s badly needed aid package. To ward off insolvency, Nicosia has raided the pension funds of state-owned companies.
It seems clear from the wording of the European Council conclusions (see above!) that it represents a draw for the moment in the tug-of-war between Germany and the rest of the EA on banking union i.e. two different time-tables, one for working out the operational framework, including the definition of legacy assets” and the other for implementation, the latter being linked to the coming into operational force of the SSM.
Events in 2013 may push the situation in favour of one or the other side. It is difficult to imagine Merkel not wishing for an unencumbered electoral run from June onwards which should create pressure for agreement on the operational framework.
As one strategist remarked (see CNBC link above);
“The fear among investors is that betting against Spain is tantamount to betting against the ECB. The market has bought into the fact that the ECB will do whatever it takes. Its [program is] virtual but it’s worked wonders. The paradox is that the program has added to complacency, the policymakers are taking their feet off the pedals [and] it’s detrimental in the long run.”
It seems that the new arrangements on banking will also remain virtual (but if substantial enough may also work wonders?).
There is also the curious agreement on the possibility of action on other fronts (apart from the agreement to be reached on the long-term budget in February).
“To this end, the President of the European Council, in close cooperation with the President of the Commission, after a process of consultations
with the Member States, will present to the June 2013 European Council possible measures and a time-bound road-map on the following issues:
a) coordination of national reforms: the participating Member States will be invited to ensure, in line with Article 11 of the TSCG, that all major economic policy reforms that they plan to undertake will be discussed ex ante and, where appropriate, coordinated among themselves. Such coordination shall involve the institutions of the EU as required by EU law to this end. The Commission has announced its intention to make a
proposal for a framework for ex ante coordination of major economic policy reforms in the context of the European Semester;
b) the social dimension of the EMU, including social dialogue;
c) the feasibility and modalities of mutually agreed contracts for competitiveness and growth: individual arrangements of a contractual nature with EU institutions could enhance ownership and effectiveness. Such arrangements should be differentiated depending on Member States’ specific situations. This would engage all euro area Member States, but non euro Member States may also choose to enter into similar arrangements;
d) solidarity mechanisms that can enhance the efforts made by the Member States that enter into such contractual arrangements for competitiveness and growth.”
Clearly one to watch as it seems to reflect a form of compromise between France and Germany on the broader institutional questions that the summit has been roundly condemned for failing to address.
Meanwhile, in another part of the forest, the PNs continue to kick up a din!
“Demand-led schemes such as medical cards and drug repayment schemes are once again likely to exceed expenditure targets and thereby threaten funding earmarked for treatments in hospitals and the community”… etc
The IMF has identified generics and salaries as areas where money can be saved. No chance of the IT mentioning either. Why ?
The PR nonsense about the priorities being set by the Irish Presidency should be seen against this background. It is both hard to see how Ireland’s situation fits into the scenario sketched out by Asmussen and, at the same time, it underlines how contradictory it will appear – and unacceptable to Irish public opinion – if some arrangement is not arrived at.
Thanks..interesting speech..particularily…”Our long-term goal is a situation where the essential functioning of the euro area is unaffected by events in individual countries, because sovereignty is shared and exercised in strong common institutions – and those institutions have a longer time horizon than politics.
This is what Jean Monnet understood when he said:
“Rien n’est possible sans les hommes, rien n’est durable sans les institutions”.
“Nothing is possible without men, but nothing is lasting without institutions”.
These words have never been more true than today.”
The best way to interpret the speech is, in my view, to see it as a riposte to the approach of the Bundesbank under Weidmann. (The two protagonists are young Turks and, more than incidentally, if I understand the situation correctly, former proteges of Merkel).
The section of the speech to which you are referring is what I would describe as the ritual obeisance to the supposed need for a political union – as argued by the Bundesbank – to run a single currency. There are numerous historic examples which demonstrate that this is not necessarily the case (as the Ireland/UK experience demonstrates). What is needed is a dominant anchor. The problem has been to get the anchor in question to accept the responsibilities of being that anchor and to refrain from taking advantage of it.
N.B. in particular this closing extract in the section in question.
“Let me stress: while I would have liked the outcome of the European Council to be more ambitious, these ideas are not intended as criticism of it. They are orientations to advance further which will need to be properly fleshed out in the years ahead as the integration process evolves. This will require a Treaty change in the medium-term in order to complete EMU in a comprehensive way.”
You need have no immediate concerns with regard to the Oireachtas becoming redundant in a European context. However, it has not been particularly successful in demonstrating its relevance in a national context. Indeed, Commission surveys have shown hitherto that the citizens of Europe have more confidence in the institutions of the EU than their own, although the balance, with the crisis, is shifting in favour of the latter.
The real interest of the speech is that it seems to reflect how Merkel views the overall EA situation (assuming that the lady in question can be pinned down on any particular view).
One of the things that stood out from the imf paper is that non performing loans in Spain are 9% vs 23% in Ireland and that is post nama. That would seem to indicate that when tshtf in spain a deal on the prom notes would look like remarkably good value.
FYI the CV (short, at least for the moment) of the Dutch politician likely to be in charge of the discussions, as chairman of the Euro Group, on the definition of “legacy assets”. He has the endorsement of Schaeuble. He is currently reported to be “reflecting” on whether or not to accept this appointment (as is, no doubt, his party).
DUBLIN (Reuters) – Ireland expects European leaders to agree to cut the country’s bank debt burden by June of next year, when Dublin’s presidency of the European Union draws to a close, Prime Minister Enda Kenny was quoted as saying on Sunday.
“By June, following the decision of the European Council, we expect agreement on the modalities of reducing the burden that the Irish taxpayer took on from the recapitalisation of the going-concern banks,” Kenny was quoted as saying by The Sunday Business Post and The Sunday Times newspapers.
“While an actual transaction may not be possible until 2014, a clear signal on how this is going to be done would certainly strengthen market confidence and reduce interest rates for Ireland as we seek to exit the programme.”
Kenny was speaking in an end-of-year interview with the newspapers.
(Reporting by Carmel Crimmins; editing by Jason Neely)
I think the idea that a deal is in the offing is supported by the conclusions of the European Council but these reflect a compromise between widely differing positions. IMHO, anything could happen!
The barometer is falling, even for economies such as the German, Austrian, Dutch, Swedish, Danish, that imagined that they could float over the difficulties of others. Not to mention the UK!
The key point is that it does not matter as far as Ireland is concerned. This may seem a strange comment but the existing programme allows for all the financing required unless the growth projections prove dramatically wrong. All the praise we are getting from the other capitals is based on the fact that they may not be.
A very strange confluence of events indeed on this eve of 2013!
By the way, how events will unfold depends a lot, again IMHO, on how the Cameron decides to play it; not as an influential member of the club but as a wrecker pushed by UK electoral considerations. The recent involvement of Tony Blair suggest that matters may be getting a bit out of hand across the water.
Again, somewhat by the way, the pressures on Cameron to come down on the right side of the argument are not confined to Europe. Washington will also view developments in the UK with a degree of chagrin if they go the wrong way. UKIP may wish to make a break “for the open sea” but there is no one out there to welcome them.
One of the achievements of the Lisbon Treaty was to strengthen the capacity of the EU to act in international trade relations. It is hard to imagine that decision-makers in Whitehall are unaware of this.