Financieel Dagblad on Ireland

Yesterday, Het Financieel Dagblad published an interview with Michael O’Leary and me on the future of the Irish economy. I said much else besides, and some colorful language was cut out. For those who cannot read Dutch, here’s what Google Translate made of it:

Ireland has not really learned from the crisis

Reforms in Ireland have not been substantial enough to lift the economy on a higher level and to make more resilient to shocks. Through weak political leadership and an indulgent attitude of the troika of IMF, ECB and European Commission, opportunities have been missed, leaving the country in the long term to continue to perform below par. A repeat of the scenario of a severe economic downturn that Dublin cannot get to the top of on its own, cannot be excluded.

This say two connoisseurs of Irish society, Michael O’Leary, CEO of Ryanair, and Richard Tol, originally a Dutch professor who because of the crisis moved from Dublin to Brighton.

“A crisis is an opportunity for reform, but in Ireland there is only cuts,” says Tol. “Even this very big crisis was no need for structural reforms, where there should have been.” O’Leary agrees with him.

“We had the opportunity to exploit the crisis to reform the labor market and to remove job-growth barriers. “Never waste a good crisis.” But we have missed every opportunity. In Ireland there is not much appetite for real, structural reforms. ”

Rebound effect

Because nothing has changed, Ireland remains a “very inefficient, third-rate economy with a high cost structure,” thinks the CEO of the price fighter in aviation. Professor Tol takes into account an economic acceleration by the rebound effect, but then foresees a new crisis. “If confidence returns, for example in 2015, another period of rapid growth follows.

We might get another ten years growth rates of 5%. But because the structural problems are not addressed, this can produce a similar crisis in 2025 or 2030. Which can be much worse than the current one if the Irish by that time have not sufficiently reduced their debts. ”

Dublin has a long way to go, even if the country is by year-end released from the troika, as is widely expected. Some key figures illustrate this. The government expenditure fell, but are still well above the level of 2005. The debt has grown so much that the IMF warns that it can be unsustainable if there is no a real economic recovery soon. A major problem is the steady increase in the number of homeowners who can no longer bear their mortgage.

Insane

O’Leary does not understanding that Ireland has not faced up to reality the beginning of the crisis. “The government gets  €35 billion in taxes, but spend €45 billion.

This is the first thing that should be reformed. Why are we still wasting perhaps €2 billion by giving everyone in this country child support. I’m a multi-millionaire, but my wife gets four checks each month to support our four children This is insane. ‘

The entrepreneur, who elevated efficiency in his business to a religion, is annoyed by the combination of high wages and strict labor laws that take the dynamic out of the economy, according to him.

“Why should an Irish doctor earn two or three times as much money as a German doctor? That would not be bad if productivity is proportionally higher. But you cannot be treated between 5 pm and 7 am.”

Shut tight

Tol regrets that important sectors of the economy such as legal services, energy and transport in practice are as closed as before the crisis. Furthermore, the 42-year-old professor knows from personal experience how high wages in Ireland are still.

“My net wages dropped by 30% between 2010 to 2012. When I started working in Brighton my salary was matched. I am now the highest paid professor in Brighton.”

That Dublin fails to get itself together, even if a crisis manifests itself as the ‘excuse, O’Leary as well as Tol explain by a chronic lack of expertise and leadership in Irish politics. The electoral system promotes that the government and parliament consist of populists.

Who please their electorate, shrink from painful measures and generally lack the knowledge and experience necessary to steer the country by a crisis. Tol: “The Dáil is full of people who can talk very well. Many have been lawyers or teachers. Expert backbenchers are not there.

No strong opposition

The professor points out that there is no separation of powers. Ministers retain their seats in the Dáil, and are the spokesmen of their own party. Moreover, there is no strong opposition, because the two major parties, Fianna Fáil and Fine Gael, are like two drops of water. What separates them historically is not idealogy, but their position during the Irish Civil War.

The troika also do not mind anymore. “The problem of the Troika,” O’Leary says, “that when the worst of the crisis had passed and the idea was established that the country was saved, focus on reforms disappeared.” According Tol especially the IMF was full good intentions, but the ECB has taken over the control. “They just want their money returned.”

Comments

comments

63 thoughts on “Financieel Dagblad on Ireland”

  1. “We had the opportunity to exploit the crisis to reform the labor market and to remove job-growth barriers. “Never waste a good crisis.” But we have missed every opportunity. In Ireland there is not much appetite for real, structural reforms. ”

    Maybe it would have been good to explain why. The terrier-like defence mounted by the permanent government. Never about efficiency. Fight them on the beaches of inertia and smother the b*stards with bureacracy. They eventually give up. They all do.

    A bit like Nick Clegg promising to reform the House of Lords.

  2. Could do with more in the way of specifics. In terms of actual policy (I leave aside reforming the Dail, FG / FF as tweedledum etc) this suggests:
    1. “strict labor laws” need reforming: I think this means less union rights, lower minimum wage, weekend payments etc, right? Probably very relevant to e.g. retail competition and prices. Are there more specifics to back this claim up, as of course there is also the mantra that Ireland has a very flexible labour market …
    2. “legal services, energy and transport” are all closed? This may well be true, but I would really like to see a properly set out argument that Ireland’s legal services are “closed”. Certainly, many more people are trained as lawyers than can get a job in them, and IIUC the Competition Authority’s proposals for reform here have been /ar e being pushed through.
    3. Furthermore, the 42-year-old professor knows from personal experience how high wages in Ireland are still. “My net wages dropped by 30% between 2010 to 2012. When I started working in Brighton my salary was matched. I am now the highest paid professor in Brighton.” Are you also e.g. among the best-cited economists in Brighton? Professors salaries have fallen precipitously in Ireland, true, and in my experience it has made a vast difference to the quality of the people we can hire. We are, for example, completely unable to hire anyone from abroad who already has a job and one or more journal publications, and that is in a less financial competitive field than economics. So academic salaries in fact still need to rise in Ireland’s research universities, as set by the international market. They may even need to rise in the UK too, if they are to be able to recruit top PhD graduates. It is in fact the low-skilled public sector workers who are overpaid in Ireland, and not at all part of international markets, rather than economics professors. Put it this way, research professors are leaving for better paid jobs abroad because of the crisis, but academic administrators and secretaries in the universities are not.
    4. “Why are we still wasting perhaps €2 billion by giving everyone in this country child support.” Maybe we should means test it alright, although that might be tough on “middle ireland”.

    So understanding the limitations of this sort of chatty newspaper article, and also being sympathetic to many of the issues mentioned, it would nonetheless have been good to be a little more specific and little less exasperated.

  3. @Otto
    2. Legal services, energy and transport are exceptionally expensive in Ireland. In energy and transport, this is partly because of a lack of competition. People in the know tell me the same is true for the legal professions.

    3. Actually, I’m the best-cited active scholar in Brighton.

  4. While I agree with the piece about the need for political reform and liberalisation of some industries, including health, the idea that labour laws in Ireland either caused the crisis or are preventing recovery is just preposterous.

    Ireland has some of the most liberated employment laws in the Europe. Compare how difficult it is to hire or fire in France or even Germany with Ireland. Many multinationals locate here because of friendly and transparent corporate taxation and attractive labour laws, but yet, the crisis must be “siezed” to strip away workers rights even further.

    And of course nominal wages haven’t fallen much! That is because household liabilities are fixed. That is crux of the problem of trying to deflate an economy in a depression and why devaluation, inflation and nominal growth are really the only way out of a debt crisis. As Krugman would say, that is Macro 101.

    “Tol: “The Dáil is full of people who can talk very well.””

    Well I would say the economics profession is full of people who can talk very well but have little knowledge of basic macro economics. Stick to complaining about subsidies, Richard.

  5. 2. Legal services, energy and transport are exceptionally expensive in Ireland. In energy and transport, this is partly because of a lack of competition. People in the know tell me the same is true for the legal professions.

    Okay, I am told that too about the legal professions. But I haven’t seen it really demonstrated…

    3. Actually, I’m the best-cited active scholar in Brighton.

    Then perhaps Brighton matching your Irish salary does not indicate any particular market failure in the wages of Irish research professors…

    I know it is not always popular to point out that it is low-skilled public sector workers who are most “over paid” in the Irish public sector, but the problem is really there, not with academic economists.

  6. @Otto
    I for sure was not the best-paid academic in Ireland.

    It was only after my wages were cut by 1/3 that I was competitive on the international market again.

    At Sussex, we have tried to poach people from Irish universities, but we cannot justify their salary demands, even if we would promote them.

  7. I don’t know how O’Leary gets away with moaning about child benefit. I’m a mother of three, and umpteen times I’ve got a form from social welfare asking for details of my children’s schools, PPS numbers, and GP. When my oldest child turned 16, I had to get a stamp from his school certifying that he was in full-time education.
    All O’Leary and equally well-heeled parents have to do is ignore this form when it comes to them. Child benefit will be cut off a month later.

  8. Well, there’s mixed evidence on that score. More than half of my own academic department has left for better paid jobs overseas (Both US and UK ) since the crisis pay cuts hit, and we are now completely incapable of hiring anyone internationally above the finishing-the-PhD-no-job-yet level.

  9. In fact, the only people we are keeping are so embedded in Ireland with family or mortgages that they are almost immovable no matter what.

  10. Otto, some facts would help, I simply don’t believe that Itish academics are underpaid, full of entitlement – yes, but not paid less than other European countries

  11. Underpaid/overpaid as a matter of moral worth, I leave to the philosophers. But underpaid vis-a-vis the international market, in the sense that Irish research universities cannot attract overseas candidates (other than finishing PhD students) for research jobs, and regularly lose well published scholars (other than those embedded in Ireland by family or mortgage) to better jobs abroad: no doubt about it. As I have said, we’ve lost half our department that way since 2008, and been completely unable to replace the experienced staff who leave.

  12. The Irish Commercial Mediation Commercial Association claimed in 2011 that litigation in Ireland carries a heavy burden of cost relative to other jurisdictions — an average of €53,800 (27%) on a €200,000 claim compared to €25,337 (13%) in the rest of Europe. Besides cost, the average Irish court case takes 515 days to resolve.

    A 2013 Forfás report says legal services (for solicitor services), costs reported by the CSO are 12% above 2006 levels

    The Public Accounts Committee said in 2011 that it heard evidence to suggest that the cost of legal services in Ireland is amongst the highest in the developed world and it has been suggested that the State itself is one of the primary drivers of high legal costs.

    The Committee also reported that five of the barristers working for the Mahon (Planning) and Moriarty tribunals earned in excess of €5m, with two of them earning almost €10m.

    Forfás says exchange rates account for a significant share of the improvements in Ireland’s competitiveness since the crash.

    Salaries account for three-quarters of total current expenditure on higher education in Ireland – compared with an international average of two-thirds. This means that Irish higher education operates with lower (nonpay) recurrent expenditure than is typical in other countries.”

    Page 43, 2011 report on higher education:

    http://www.hea.ie/files/files/DES_Higher_Ed_Main_Report.pdf

    The Institute of Public Administration said in report in 2011 that on average, top managers compensation in the UK and Ireland in 2009 was 7.7 times that of administrative staff (secretaries) whereas for the Nordic countries top managers compensation was 3.5 times that of secretaries.

    Similarly middle managers compensation was 4.2 times that of secretaries in the UK and Ireland whereas it was 2.2 times greater in the Nordic countries. The Nordic countries have a much flatter compensation structure (particularly Finland and Sweden), whereas the UK and Ireland have opted for higher compensation at the higher levels.

    OECD data shows much higher multiples in Ireland compared with average income for GPs and medical consultants compared with for example Finland.

    Irish Times report March 2012:

    ONE HOSPITAL consultant received more than €400,000 from the public health service, while up to 500 senior doctors are earning more than €200,000, the former HSE head of human resources has said.

    In an interview with The Irish Times, Seán McGrath , who stepped down last Wednesday, said some hospital consultants were able to complete their 37-hour commitment to public hospitals by Wednesday lunchtime and to devote the rest of the week to their private practice, while receiving additional allowances for being “on call”.

    For those who wish to cry ‘public sector bashing,’ read the OECD’s report on Irish pensions that was published on Monday.

  13. Yes, legal costs are high, the question is how this relates to competition in the sector. Tol said that the legal profession is “closed”, but that argument is not made out by Tol, by his (honestly written) subsequent follow on post, or by MH’s post above. I do understand that public sector arrangements for competitive tender (or, er, non-competitive tender…) may be part of the story, but again, it’s no more than a hunch.

  14. For anyone who knows anything about how hard it is for companies to let people go in the Netherlands, its pretty amusing to read an article in the Financieel Dagblad about inflexible labour markets in Ireland. Unfortunately the context would probably be lost on most of the readership.

    That said, we do still have registered employment contracts, centrally negotiated wage agreements and (in international terms) highly paid public sector employees.

  15. @Richard Tol

    “People in the know tell me the same is true for the legal professions.”

    How about some statistics or a bit of evidence based analysis there professor 🙂

  16. BTW, as far as I know Ireland has highest ratios of lawyers to people in the EU. That suggests plenty of competition.

    @Michael Hennigan

    If you get the chance, perhaps you would link to that forfas report and/or the evidence given to the Public Accounts Committee.

  17. @otto

    What you have here is the typical problem of the right – where it is not simple minded it is simply wrong.

    The simple minded piece:

    Legal costs in Ireland are not high because the professions are closed, legal costs are high because of poor state regulation of the legal sector and the pernicious influence of the legal professions structure (feudal, with the top of the profession earning disproportionate fees because of their social influence). An outbreak of fatal food poisoning at the top table of an annual law society event would do more for legal costs than doubling the amount of barristers.

    Irish GPs are indeed overpaid but here again the problem is lack of regulation (and a proper national health service) rather than insufficient medical staff.

    The simply wrong bit:

    Michael O’Leary’s idea that supply side side reforms (or welfare cuts) are going to fix a crisis of demand is simply wrong. This urge to impoverish workers and eliminate the state is a character reflex of the right and not a well thought out economic perspective – the man is a reactionary clown.

  18. “the man is a reactionary clown.”

    I think the only people in this country that still take O Leary seriously are our moronic press and overindulged, incompetent Dublin business elite..and chronic drunks

  19. In Ireland the interface between private property and the public sector is where much political corruption occurs.Two examples are the planning process and state/sovereign commercial leases. The findings of the Mahon Tribunal were “Corruption in Irish political life was both systemic and endemic”. In the Moriarty Tribunal the findings were ” What was attempted on the part of Mr Dunne and Mr Lowry was profoundly corrupt to a degree that was nothing short of breathtaking”

    Ireland has the most draconian anti-tenant commercial property lease law in the world i.e. ratchet upward-only rent reviews tied to long leases,some as long as 65 years e.g Carrisbrook House, Dublin 4,but normally 35 years. Former Taoiseach Mr Haughey required a minimum of a million pounds per year,to finance his lavish lifestyle. Many of Mr Haughey’s bagmen are sovereign landlords-this was the pay back. Many Irish politicians families,friends and bagmen are sovereign landlords. This is institutionalised political corruption. The sovereign should be a lease maker not a lease taker,because of it’s unbeatable covenant. These sovereign leases are sovereign bonds with the notorious ratchet upward-only rent review attached. Sovereign landlords have bled the state dry using this feudal lease law and have wasted billions of Irish citizens money. We are alone in the eurozone with this feudal commercial property lease law, where leases are 5 to 10 years in length and rents are reviewed annually in line with inflation
    Reckless Irish banks lent tens of billions against these feudal leases,not against the properties themselves,and created the greatest commercial property bubble in the history of mankind. When this bubble burst it bankrupted the Irish banks and the sovereign. The only reason our country has these feudal leases is because the sovereign signed them. No other government in the world would sign these feudal leases.

  20. @rf

    Michael O Leary is a larger than life character, he speaks Double Dutch!

    And while much overhyped, the concept of a lack of reform does have some merit,

  21. Eurostat reported last June that Irish consumer prices in 2011 were 17% above the EU27 average compared with 2% above average in the UK and 3% in Germany.

    There are of course solicitors and barristers scratching for business.

    The PAC estimated in 2011 that the State spends about a half a billion euros annually on legal costs — the State, including its agencies tends to use the big name firms for routine work, who appear among the top fee firms in Europe.

    According to figures published by the Department of Finance in response to a parliamentary question tabled by Sinn Féin deputy Mary Lou McDonald, over €71.6m has been spent on lawyers’ fees by the Office of the Minister of Finance, the National Asset Management Agency (Nama), the National Treasury Management Agency (NTMA), the National Development Finance Agency (NDFA) and the National Pension Reserves Fund (NPRF) since 2008.

    Five years into the crisis, generic drugs legislation is still awaited even though the State’s drug’s bill has risen €400m in the period.

    The lack of public procurement transparency involving annual spending of about €12bn, is against the public interest.

    Irish Times report July 2012

    CERTAIN PROFESSIONALS are “feasting on the carcasses” of insolvent and semisolvent companies at a time when many sectors are “taking a hit” and many people have had pay reductions, a High Court judge has said.

    Mr Justice Brian McGovern expressed “general concerns” about some professionals appearing to be getting good pickings from troubled sectors when other people who are working just as hard are getting less.

    He made the comments after approving “a very large figure” of €509,543 fees, plus outlay and VAT making a total of €647,382, sought for some five months’ work by Luke Charleton of Ernst Young, the chartered accountant appointed as special manager to Newbridge Credit Union on January 13th last. Some €70,977 legal fees were also approved.

    @ zhou_enlai

    http://www.forfas.ie/publication/search.jsp?ft=/publications/2013/title,10409,en.php

  22. I think O’Leary thinks like a typical Dutch person. But being in your face about complex problems won’t solve anything. See SNS Reaal.

  23. @Michael Hennigan

    “The PAC estimated in 2011 that the State spends about a half a billion euros annually on legal costs — the State, including its agencies tends to use the big name firms for routine work, who appear among the top fee firms in Europe.”

    The fact of the matter is that state employees feel they are covering their back sides and ministers back sides by hiring the most expensive consultants. This applies just as much in relation to management consultancy services, accounting services and inforamtion technology procurement and project management.

    Even if things do go wrong the civil/public servants can point to the amount of fees they wasted on expensive advisers as evidence they did their job well. (Of course, those departments and bodies that insist on learning how to do the project themselves do it far better than those that rely on overpaid consultants.)

    It is hard to know how this can be cured. One way could be to limit how much any one firm or group of firms can earn from work for the state or state bodies. If the big 4 accounting firms and big 5 law firms (or whowever many it is of each these days!) were restricted to 35% of state business then they might charge less to get more work and the market for high quality management, accouting and legal advice would be improved by creating a guaranteed market for new-comers. Other businesses would get the beenfit of tapping into these professionals too.

  24. Edward v2.0: not much evidence in those documents, perhaps with exception of the proposal to allow licensed conveyancing by non-lawyers.

    Not at all convinced that getting rid of senior / junior counsel distinction has much to do with it. There are still going to be senior / junior lawyers, I assure you, and the former will charge more.

    A more detailed analysis of state procurement of legal services might make for a more informed discussion.

  25. @rf

    …and chronic drunks

    I see what you did there.

    A blood alcohol level test before allowing Irish journalists and politicians to opine or legislate would be the essential health and public policy reform measure.

    Come on Troika.

  26. @ otto

    “not much evidence in those documents, perhaps with exception of the proposal to allow licensed conveyancing by non-lawyers”

    Did you look at the charts I pointed to on page 82? They show that: (a) legal services were 12% more expensive in Q1 2012 than in 2006 (whereas the closest industry comparable, accounting services, are down by about 17% over the same period); and (b) Ireland has the fourth highest cost of enforcing a business contract out of the 19 analysed.

    This is concrete evidence that legal costs are high on an absolute basis (higher than 2006 despite general fall in cost of services) and also on a relative basis (93% higher than Germany for example).

    Please explain how this actual data does not count towards the evidence of high legal costs in Ireland when a ‘proposal to allow licensed conveyancing by non-lawyers’ does?

  27. Er, sorry, perhaps you missed the above discussion as it developed: it is acknowledged that legal costs are high in Ireland, the question under debate is whether the legal profession is “closed” (as Tol said), with competition between lawyers inhibited. There is little evidence of that presented so far, although the reference your document made to conveyancing is in fact very pertinent to this point.

  28. @Otto
    You’re putting too much weight on a single word, which summarized a longer discussion in a foreign language.

    The Competition Authority found that “the legal profession is permeated with serious and disproportionate restrictions on competition.” That was in 2006. The IMF found the same thing as it was preparing for the bail-out. Although a condition of the agreement, action has yet to be taken.

  29. In Ireland we elect populists, a truer statement was never said.

    I see today two leading indicators for Germany and China that indicate slowing economies for both. Canada’s housing bubble is popping which means the 300,000 Foreign Temporary Worker visas will be cut substantially. Another safe haven gone.

    The recovery weakens with each passing month.

    Tough times for populist politicians and even worse for the rest of us.

  30. @Mickey
    If the world economy looks like it really will fall over the plutocrats will change course sooner than you can say keynesianism. It is all about the money schlussendlich.

  31. I can well imagine what type of labour reforms we could expect from a Michael o’Leary administration if such an evil were to come to pass.

    Vastly increase the labour pool to drive down wages harder and faster and create a fractured society happy to work for peanuts. Anyone who did not like it could emigrate.

    Persons from right of center who opposed this business first society last approach would be blasted as extreme right and people from the left of center would be told that it was something to celebrate always and forever.

    Put like that it seems like the Michael o’Leary way is already the European way.

  32. @rf

    “Michael O Leary speaks Dutch?”

    His PR people speak double-Dutch that’s for sure 🙂

    His legal people are worse (I know one of them) – they have a standing order to challenge everything (I mean, everything), regardless of whether there’s any right or wrong. Challenge even when you’re clearly in the wrong in the hope you will simply get away with it.

    They often do.

    On the subject of overpaid lawyers, don’t get me started on my barrister relative who sends all his four children to the (very high) fee paying school that said O’Leary went to and yet is still able to wander around Dublin all the time wondering what on earth he should spend all his money on this week. I swear he and his wife are keeping the Irish retail sector afloat. Meanwhile, I have to persuade Mrs PR Guy not to even thing about trying to compete with them. It’s a battle.

  33. @ zhou

    ‘The fact of the matter is that state employees feel they are covering their back sides and ministers back sides by hiring the most expensive consultants’

    Major external contract decisions get taken at the highest level of the PS. That’s the level where lobbying is at its most intense. Both buyers and sellers of state services live in the winners’ enclosure, where lots of stuff gets sorted on the golf course. Lesser persons are tasked with producing the supporting paperwork post hoc.

    Talk about conflicts of interest is considered to be in bad taste, because milking the state for private and corporate advantage is a feature, not a glitch, in our governance system. As Joe Lee said, the possessor principle is dominant. No wonder there is such intense competition to serve the country.

  34. I wouldn’t say the young have excessive labor rights in Ireland.

    A lot of the young employed in Ireland, live fixed term contract to fixed term contract and can only dream of the words ‘permanent’ and ‘pension’.

    Interestingly HRs function seems exclusive to employee rights erosion these days. Usually via inserting new condition eroding paragraph after condition eroding paragraph in each new ‘contract’.

    Current contracts allow the employer to move the employees employment location to Mars, change his/her work title to ‘Alien test Feed’, not reimburse her for the expense and then give his/her 1 months notice of termination of employment if he/she was able to hitch back to earth.

    I wouldnt consider the work conditions of Ireland’s under 35s ‘rigid’. I suppose they could take out the employees right to resign and use the Gardaí to force employees to work?

  35. This article gives rise to an uneasy feeling. Is this yet another example of the distressed peripheral countries being framed as dysfunctional by the media and political elites of those central eurozone member states who do not wish to take any responsibility for their own mistakes in the crisis? A framing based on an audacious hypocrisy, as so described by Richard Portes in his April 13 TCD presentation :”Creditor countries have been bailing out their own banks that made foolish loans to these countries by transferring fiscal costs to debtor country taxpayers, meanwhile taking the moral high ground – hypocrisy!”

    I guess Michael O’Leary was selected for interview on the basis that he is a ‘celebrity’ throughout the EU because of the strategic importance and commercial success of Ryanair within the aviation sector. But it is questionable that he is typically representative of the internationally trading Irish business sector or indeed anyone except his good self and his company. As Mary Feely points out above, O’Leary’s fondness for fingering universal child benefit as an example of the profligacy of the Irish state is not alone tiresome in its constant repetition, but remarkably disingenuous in respect of his personal circumstances. If Mrs O’Leary is clawing in CB payments for her four children, or however many little O’Leary’s there are, that’s her own personal choice. It strikes me that Mr. O Leary’s real objection is to the whole concept of the welfare state. If he wants to argue that one, he might have more credibility if he was more forthright about it.

    It’s unfortunate that Richard Tol was paired up with such a jackanapes in this interview, because Richard has interesting things to say, irrespective of whether or not one agrees with his interpretation of how the Irish state works. I don’t think there can be much disagreement around the point that a glorious opportunity for reform has been wasted and that we may yet live to regret it. But genuine reform depends on a sustained political commitment to reform. That doesn’t exist. It also relies on a political vision of the sort of state we want to have and the redistribution of wealth within that state. That doesn’t exist either. In the face of such disappointment, apathy, and personally seeking ways to survive the morass we’re in, becomes the only fallback.

  36. “O’Leary does not understanding that Ireland has not faced up to reality the beginning of the crisis. “The government gets €35 billion in taxes, but spend €45 billion.”

    Imagine if Martin Wolf had been asking the questions

    http://www.ft.com/cms/s/0/60b7a4ec-ab58-11e2-8c63-00144feabdc0.html

    “Usually, one can ignore the macroeconomic consequences of fiscal austerity: either private spending will be robust or monetary policy will be effective. But, after a financial crisis, a huge excess of desired private savings is likely to emerge, even when interest rates are very close to zero.
    In that situation, immediate fiscal austerity will be counterproductive. It will drive the economy into a deep recession, while achieving only a limited reduction in deficits and debt. “

  37. @ veronica

    Michael O’Leary used to claim the mansion tax credit.

    There’s a house off Main St/Rock Hill in Blackrock, Dublin and near the Dart entrance there used to be a notice on the back garden gate on visitor access, which was a condition of the tax credit. Visitors to the garden were welcome in January and February — imagine the céad míle fáilte!

    The last time I flew Ryanair I had to pay a €12 visa processing charge. I would have taken the Cork-Dublin train but there was none on St Stephens Day.

    There were a limited number of exempt countries ex-EU27 on the booking page, but mine wasn’t among them and there was no option for Irish passport holders. Several attempts to avoid the charge resulted in screen freezes.

    Service with a scowl! – – but it works.

    On competitiveness, the issue was mentioned on Monday when two ministers attended one of the regular jobs media events.

    It was an illustration of the gulf between spin-addicted ministers, in particular Richard Bruton, and reality. Ruairí Quinn was also at the event.

    A so-called ‘expert group’ produced a report on how 43,000 net jobs could be added in manufacturing by 2020 — a rise of 21%.

    This is a very important issue and challenging one — as all developed countries have shed mfg jobs in recent decades.

    To fit in the target jobs to the 2016 Action Plan for Jobs, the target to 2020 was halved – – which shows that it’s not a serious goal.

    The list of initiatives required to ensure that job creation actually happens are unimpressive and by yesterday, I would guess that Minister Bruton had forgotten what they were. He had of course other meetings to attend and so on.

    The report on manufacturing uses the term ‘strengths’ 49 times; there is no use of the words ‘weakness’ or ‘weaknesses.’

    Every day, everywhere, there are people who start businesses that appear to be slam dunks; some even believe there is no competition and they do not last long.

    There was also an ‘expert group’ report on training published Monday. Links here:

    http://www.finfacts.ie/irishfinancenews/article_1025886.shtml

    200,000 net jobs needed and little chance of realisation.

    Wonder how much exposure the private-schooled Bruton and Quinn have to the lives of the silent victims of the depression?

  38. @mary feely

    +1

    next time O’Leary rants on about the stupidity of getting CB, maybe someone will ask him why he claimed it.

    As for labour law, with the way Ryanair treats its employees how anyone could take lectures from MO’L is beyond me.

    However Richard’s point on the professions is more to the point. The debacle over the HSE legal services contract a couple of years ago was a classic. The underbidder’s bid was significantly lower than the winners, but the winners were of course Arthur Cox whose then boss Eugene McCague just happened to be chairman of the HSE. Of course he absented himself from the discussion on the tender. But the state still ended up paying almost double for its services. It’s here but behind stupid paywall http://www.irishtimes.com/news/health/arthur-cox-chairman-not-privy-to-tender-process-hse-1.1081884

    Anyway, the point is, the lawyers, the accountants etc are still charging a lot of money. Though in fairness, the feudal factor someone referred to above is an issue. Plenty of single practice guys barely getting by.

  39. @bunbury, sarah

    Bunny you really are to be congratulated on that post. You are essentially whistleblowing. You are educating us. They say sunlight is the best disinfectant…

    Previously, despite this being Ireland’s premiere site for the exchange of economic ideas, and the country’s remarkably high non-traded costs, IMF programme etc, the only ventilation of this core subject I recall was via a slightly less detailed tip-off from some bloke called Gadge on NWL, see here:

    http://www.irisheconomy.ie/index.php/2012/12/11/work-and-poverty-in-ireland/#comment-357389

    and more substantively, here:

    http://namawinelake.wordpress.com/2012/10/01/imf-is-frogmarching-this-government-into-delivering-reforms/#comment-40645

    I’m sure all right thinking economists who are basically on Ireland’s side would encourage you and your fellow warren dwellers to keep those stones propped up as much as you can!

  40. @Bunbury

    And I think there were about two newspaper articles about it at the time, and then it just shut down. I guess there’s more mileage in giving out about tax exiles and TDs expenses 😉

    Another issue:

    The competition authority published a report in 2009 and 2010 on GP services.

    At the moment, a GP needs a GMS contract to be able to afford to set up a practice. (especially now that apparently half the country has a medical card. Is this some surreptitious creep towards universal free GP care? of which I don’t approve btw. I think people should be charged something for a GP visit – like a tenner, otherwise the place fills up with time-wasters).

    ANYWAY the report is here,
    http://www.tca.ie/EN/News–Publications/News-Releases/CA-Recommends-Changes-to-Improve-GP-Services.aspx (that’s the PR, pdf of report on right)

    and focuses on how access to GMS contracts is a block to competition. Of course, nothing happened.
    But I believe it was incorporated into the Troika agreement. So in other words, they have taken a recommendation by our OWN authorities, who know the solution to the problem, but made it a bailout condition, because its the only way it will ever be implemented. And even then, what is the status of this crucial change?

    You can have a doctor sitting on the GMS contract in an area providing a crappy service, and young doctors unable to set up and compete. Go Troika!

  41. @Sarah
    Don’t hold your breath.

    The IMF arrived with a well-prepared reform plan, the European Commission had no experience in these matters, and the ECB was only interested in the stability of the banks to which Ireland owed money.

    The influence of the IMF in the Troika has waned. With Ireland leaving the bail-out program, its conditions will be void.

    You’ll have to wait till the next time IMF will be in town, in 2025 or so.

  42. ah! I missed that. Thanks for the link. (toptip: lie and say you are a health professional to read it) I must ask around and see if the new contracts have trickled down into competition on the ground.

    Many thanks Otto.

  43. @ Michael Hennigan,

    Claiming the mansion credit! Oh dear God, help us. There’s something very sad about such underlying personal meanspiritedness. Such people would claim Christmas, particularly if they thought they could deprive everyone else of it, and then excoriate the government of the day for acknowledging any need for Christmas.

    As for Ministers ‘addicted to spin’, I think that’s how lack of competence, lack of imagination and lack of vision are publicly manifested. It’s also part and parcel of political ‘performance’ in that Ministers are obliged to talk things up rather than make candid admissions that that they don’t understand the problem they’re supposedly dealing with, and that their preferred solutions, of the back of the envelope variety and devised without much thought for consequences or effectiveness, won’t make a ha’pworth of difference to it anyway. I’m not at all convinced that educational or other aspects of personal background have anything much to do with it. One of the few virtues of our political culture is that national politicians, irrespective of their public office, cannot avoid direct exposure to the difficulties which their constituents experience on a daily basis. The list of failures in every area – from health to public service pay, from justice to economic management – are piling up around the ankles of this government. It’s not that they can’t see the problems, it’s that they lack any capacity, individually or collectively, to deal with them.

  44. “next time O’Leary rants on about the stupidity of getting CB, maybe someone will ask him why he claimed it.”

    No, no, no. I saw the same complete failure to grasp the point when Warren Buffett claimed he didn’t pay enough tax. “He’s free to gift as much as he wants!” they cried. I don’t like MOL, but those of you claiming he’s hypocritical over CB are really missing the point.

    THE POINT: Very rich people are given money by the state for every child they have. Some of them are fantastically, out of your wildest dreams rich people. If one, or three, or 17 or 100 of these rich people give the money back, it does not change the principle absurdity of the situation one iota. And it really makes no difference financially. The state should not show such largesse. Particularly a state that is failed economically and financially.

  45. In Ireland the interface between private property and the public sector is where much political corruption occurs.Two examples are the planning process and state/sovereign commercial leases. The findings of the Mahon Tribunal were “Corruption in Irish political life was both systemic and endemic”. In the Moriarty Tribunal the findings were ” What was attempted on the part of Mr Dunne and Mr Lowry was profoundly corrupt to a degree that was nothing short of breathtaking”

    Ireland has the most draconian anti-tenant commercial property lease law in the world i.e. ratchet upward-only rent reviews tied to long leases,some as long as 65 years e.g Carrisbrook House, Ballsbridge,but usually 35 years. This feudal lease law was organised by a cartel.
    Former Taoiseach Mr Haughey required a minimum of a million pounds per year,to finance his lavish lifestyle. Many of Mr Haughey’s bagmen are sovereign landlords-this was the pay back. Many Irish politicians families,friends and bagmen are sovereign landlords. This is institutionalised political corruption. The sovereign should be a lease maker not a lease taker,because of it’s risk free unbeatable covenant. These sovereign leases are sovereign bonds with the notorious ratchet upward-only rent review attached. Sovereign landlords have bled the state dry using this feudal lease law and have wasted billions of Irish citizens money. We are alone in the eurozone with this feudal commercial property lease law, where lease lengths are 5 to 10 years and rents are reviewed annually in line with inflation

    The state,by colluding with this cartel and signing these feudal leases,legitimised them and copper fastened them for all commercial tenants. Reckless Irish banks lent tens of billions against these feudal leases,not against the properties themselves,and created the greatest commercial property bubble in the history of mankind. When this bubble burst it bankrupted the Irish banks and the sovereign. No other government in the world would sign these feudal leases.

  46. @ Ronan and Sarah Carey

    Your reasoning is overly simplistic. Child Benefit is currently a universal welfare payment, meant for the benefit of the child. It has to be claimed by the parent, which, for those rich beyond your wildest imaginings, implies a clear choice: to claim or not to claim. In Ireland, child benefit payments are not only universally accessible, free from taxation or means testing, they are unusually large by comparison with most other EU states. This is because Ireland chose to increase levels of CB direct payments rather than the state subsidising a range of child and family supports, such as childcare services, free developmental checks, a state-supported system for pre-schooling education and so on, as are available in other countries in which the direct cash payments are correspondingly low.

    Having embarked on that policy, the current (and previous) government finds itself in a bind. It does not have the money to provide a range of child support services such as are available in other EU states. Further, its elevated cash payment regime has given rise to private provision of these services – a childcare industry involving creches and pre-schools – as part of the private sector economy. Cuts to CB limit the potential for women to participate in the workforce,especially in the early years of their children’s lives when the real burden of child care costs are experienced by families. Forcing the mothers/carers of very young children out of the workforce because they cannot afford childcare costs is not good for the economy in the long term as skills are lost and some of these people may never become economically active again.

    In the last Budget the government had a choice – to cut the direct CB payments or to tax them in relation to overall household income thresholds. For their own political reasons, they chose to make further cuts.

    It is generally accepted that the child support system is in need of reform. The Minister for Social Protection, Joan Burton, recently published a report outlining what shape that reform and a future system might take – a report which she had received several months previously from the expert group she appointed to examine the issue when she took office. Personally, I believe the Minister is committed to reform, but to execute radical reform that is equitable and effective in supporting the welfare of children requires joined-up thinking and action across a range of departments of state.

    If the political will was present, CB payments would be taxed out of existence for the MOLs of this world, depriving them of the ‘largesse’ which they clearly despise but nonetheless personally choose to claim as their entitlement – hence, the charge of hypocrisy. The real question then is how the state should support the welfare of children – by enhanced direct payments that enable parents to ‘buy’ the services required or by the state subsidising those services, supplemented by a much smaller direct payment. The alternative is to eliminate child support entirely. I doubt if even the MOLs of this world, regardless of their stridency and derision of the current system, would go along with that.

  47. Regardless of cash issues where the government is constrained, there is nothing stopping it making reforms to company law to clamp down on multiple directorships, employee representation on boards, whistle-blower regulation, increased director responsibility

    To date very limited legislation has been passed to prevent a repeat of Anglo

    All the squeeze has been directed at the bottom but the problem is at the top

  48. @veronica

    If the political will was present, CB payments would be taxed out of existence for the MOLs of this world, depriving them of the ‘largesse’ which they clearly despise but nonetheless personally choose to claim as their entitlement – hence, the charge of hypocrisy.

    Eloquent and savage Veronica. Nice work.

    It should also be pointed out that means testing social welfare provision is a popular right wing wedge tactic. Once a benefit is not universally available it is easier to persuade those just above the net that they are being unfairly treated both setting the less well off versus the even less well off and allowing the scope of the benefit to be gradually shrunk.

    Small state conservatives love that stuff (it was a Thatcherite specialty) and the disingenuous carping from neoliberals about cutting child benefit to punish the well off is truly stomach turning.

  49. @ Vinny,

    Thank you – compliment graciously accepted, even if entirely unmerited!

    @ Shay,

    Personally, I think that universal measures of child support should be observed in principle as a mark of a progressive society. The problem in our current CB system is the imbalance between the services provided by the state to support the best outcomes for children, especially in those crucial early years, and the direct payments which, as it turns out , are entirely inadequate to meet the child care costs of those who need them most and superfluous to those who don’t need them at all.

    For example, a young mother with one or two children under the age of four, who has part-time employment (such as occasional teaching in a third level institution) paid at an hourly rate which is extremely low, will have to pay about 15 euro per hour for a ‘babysitter’, which cumulatively amounts to at least twice what her ’employment’ delivers in earnings. Workplace creche facilities do not provide a viable alternative since in Ireland, unlike some other EU states, a minimum whole day or half-week charge is generally applied and it is not possible to drop infants into creche care for an hour or two and be charged an ‘hourly rate’. Neither the babysitter nor the creche service are thus viable, and the CB, in any case, makes only a minor contribution to the overall childcare cost. It becomes a choice between working at an economic ‘loss’ or not working at all.

    Dismantling the current policy mess and replacing it with with a child support system that is both equitable and effective requires a strategy that extends beyond one political cycle. Once off crude cuts to direct payments or means-testing will not solve the problem.

  50. @ Richard Tol. What significant Competition Authority recommendation on the legal services will you not find being implemented in Ireland today? And all of them you will find in the EU MoU right back to 2010. Did the IMF lead here? Ask the Competition Authority who visited them more – the Commission or the IMF? And ask the Authority how much the Commission worked with them to push through reforms covering the legal profession? I believe you will find that the Authority has a good view about that. The IMF very much took a back seat. Moreover, thanks to the Commission making it an MoU condition, the Authority is the only government-funded body to see an increase in manpower. You have a view of the role of the various troika members which is utterly unsupported by any evidence.

Comments are closed.