FT: Osborne wins the battle on austerity

This editorial represents the shift in the UK austerity debate – here.

93 replies on “FT: Osborne wins the battle on austerity”

The good data keeps on coming for George Osborne – UK employment data is spectacular this morning. The strategic failure for the anti-austerity brigade was in setting this up as a clear contest. Normally they aren’t as dumb as that. Now they have clearly been seen to lose and will have to fight a 10 year rearguard battle to protect the good name of Saint Keynes.

Both sides are over-stating their case, it seems to me, in a debate which is rapidly losing any real relevance and never had any as far as Ireland is concerned as the type of policy flexibility it assumes governments have is simply not available.

John Plender, also in the FT, points out the consumption led nature of the Osborne bounce i.e. it is simply a repeat of past UK experience.


That is, however, the UK’s problem. Whatever its character and durability, the fact that it has arrived must surely benefit Ireland given the close economic ties between the two countries.

Summary of this morning’s UK unemployment data in the DT.

Employment rose by 80,000 in the three months to July to stand at 29.836 million, which is the highest level since records began in 1971.

Claimant count unemployment fell by 32,600 in August to a four-and-a half year low of 1.4018 million. This followed drops of 36,300 in July and 29,400 in June. The claimant count unemployment rate fell to 4.2pc, the lowest level since February 2009.

The number of unemployed on the International Labour Organization measure fell by 24,000 in the three months to July to stand at 2.487 million – this is the lowest level since the three months to May 2011. The unemployment rate on the ILO measure dipped to 7.7% in the three months to July.

I agree with DOCM that it’s too early to put the champagne on ice.
With half the exports from indigenous Irish firms going to the UK, the recovery will help.

To match John Plender’s article on the UK economy, the FT’s Robin Harding has a similar slant on the US economy today:


With both China and Japan working on reforms, maybe Chancellor Merkel’s steady as she goes approach will do the trick for Germany!

How many expected a trade balance with the other 16 member countries of the single currency?

I haven’t been closely following the developments in the UK but the spending data in real terms, which shows that spending (current and capital) in 2009/10 was £716bn; £720bn in 2010/11; £705bn in 2011/12; £675bn in 2012/13 and it’s forecast at £704bn in 2013/14, at a macro level hasn’t been a huge adjustment.

We know from Ireland that whatever the future holds for debt sustainability (public debt at 159% of GNP and household debt at 155% of GNP), austerity has been selective and has impacted a minority of citizens.

Just this morning, Independent News & Media announced that it got approval from the Pensions Board to cut the accrued pension benefits of its staff by up to 39%.

In the period 2008-2013, excluding sovereign support for banks and interest servicing, foreign lenders will have provided the equivalent of half the value of annual GNP to fund Irish ay-to-day public spending.

What is NAMA’s raison d’être again,something about returns to the taxpayer.If the developers had been allowed work through their irish problems via their significant UK exposure by developing,one wonders how the irish taxpayer may have done.
Not much worse that say getting your entire strategy wrong and flogging everything not nailed down,specifically highly sought sites,while hoarding RE in a morbid domestic economy.

Oh well no reason to hold anyone accountable or anything like that….stupidity and failure after all is lauded,hey they may get promoted,its success thats bothers people.


Blame the private boarding schools in Ireland. They are the breeding grounds for the eejits that end up wrecking the country every 20 years. If you have to have elites at least make them vaguely talented but our lot wouldn’t be fit to clean the toilets at Eton or Harrow.

@JF,a fella I know just drove by Tresaury Building,says NAMA called a staff meeting,they all holding hands belting out the Fields Of Athn….nothing like applauding and cheering mediocrity.
They got outsmarted by a bunch of “Malyisans” at Battersea who had never done a deal in London,yet even they could even spot the potential.
Oh well I’m sure there a few yank carpetbaggers to cuddle up too,luckily you now have almost no London exposure…….way to go NAMA!

@ john gallaher

They got outsmarted by a bunch of “Malyisans” at Battersea who had never done a deal in London..

The ‘Far East’ is of course by name a faraway place. What would people know there?

Robert fisk wrote a few years ago:

I still remember turning up at the Saudi embassy in Beirut and handing my visiting card to the press counsellor. ‘Robert Fisk, Middle East Correspondent’ was printed in English and Arabic. And the English-speaking diplomat looked at me quizzically. “What is ‘Middle East’?” he asked. Jesus wept.

It should be an interesting question for anyone who hasn’t heard of a guy named Alfred Thayer Mahan.

On London, it was of course stupid for a public agency to flog prime properties in London during a recession, with typically blue-chip rental income.

Does anyone have the stats on how many of the super new jobs are part time ?
I can’t see the housing recovery lasting until the election.
A reliance on short termism has knackered the UK over the last 30 years.

Also a bit surprising to see the FT editorial jumping on the bandwagon. Janan Ganesh may be involved. He’s George’s biographer.

I’m delighted you asked!

Between February to April 2013 and May to July 2013:
• The number of men in full-time employment increased by 60,000 to reach 13.85 million.
• The number of men in part-time employment fell by 19,000 to reach 2.10 million.
• The number of women in full-time employment increased by 34,000 to reach 7.94 million.
• The number of women in part-time employment increased by 5,000 to reach 5.95 million.

It’s easy to bash Nama. Not so long ago, various people (including Morgan Kelly) believed all the money invested in (or lent to) Nama should be written off. Instead, Nama has raised over €12 billion to date and thus redeemed over €6 billion of its bonds. I don’t see what alternative it had to selling off some of its prime assets (ie, London property) early in order to begin its repayments. And some of the projects (eg, Battersea) were beyond the capacity of the original borrowers to undertake.
I also see from their reports that Nama has actually approved €1.8 billion in funding for debtors, €1 billion of which is outside Ireland. So some projects are being financed, presumably where they make commercial sense.

Number of part-time workers has gone up by about half a million since 2008 I think. Number in full-time employment is about the same.

2008 was the peak of the long economic fairy tale engineered by Keynesians on speed, so a very unfair comparison. It’s incredible that Osborne et al have managed to engineer record levels of employment in the face of all the harm done by the Brown and Balls.

@Ninap,like JF i’m delighted you mentioned it!

“Nama has raised over €12 billion to date and thus redeemed over €6 billion of its bonds. ”
Like from the dead say,or via panicked fire sales into a rapidly rising and vibrant,London market.So the ‘strategy’ is sell, or sell ,or say sell anything in London,must really motivate the buyers to pay top dollar….everyone just loves a willing seller,specifically an out of towner..
The bonds the bonds whats the vig on them still less than 2% yet flogging stabilized RE at what 8 or 9% cap rates-why they don’t understand positive carry?

“I don’t see what alternative it had to selling off some of its prime assets (ie, London property) early in order to begin its repayments. ”
How bout drawing down some that unused LC of 5BILLION at less than 2% !
Who asked them pay it back early,what there is a ‘bonus’ built in or a early redemption discount ?

“I don’t see what alternative it had to selling off some of its prime assets (ie, London property) early in order to begin its repayments. ”
So take them out and JV the land,the chap behind this project was hired by the new owners,he as available to NAMA!

“I also see from their reports that Nama has actually approved €1.8 billion in funding for debtors, €1 billion of which is outside Ireland. So some projects are being financed, presumably where they make commercial sense.”
Ah now ‘approved’ such a lovely word any examples or skinny on whats draw down ?

They replaced barcelona with shamrock rovers,it was an incredible bench of talent now you have amateurs.
The NTMA goes on and on and on bout how they ‘different’ that other PS workers in order justify there outrageous salaries,is Corrigan still on half a mil?

Treat them like that,if any private equity fund had pursued this non strategy,security would be escorting the person responsible out the door today.


” I don’t see what alternative it had to selling off some of its prime assets (ie, London property) early in order to begin its repayments.”

Initially at least, NAMA had no written obligation to pay back bonds earlier than the maturity date.
However, NAMA or their government mini masters, believed it better to be seen as best boys in the class.

Ergo, they/we flogged prime properties at knock down prices. Great move. Genius itself.

Perhaps “it was the right call” as the Secretary of the DOF might say.

@ JF: “Blame the private boarding schools in Ireland.”

I’ll be polite Johnny. You have not a clue what you are referring to. Unless of course, you’re taking the p***! Like Ross O’Carrol-Kelly! Which is it?

I suppose its – “Look at the numbers – just ignore the Terms and Conditions!”

You want to ramp up your economy? Jolly good! Now the two essential nutrients: easy(ish) credit and cheap(ish) energy. How are we doing there? Cost of credit is near zero. Terrific, but lots of folk are plain tuckered out on debt. And energy …? Little problemo brewing there.

Anyone watch ‘Blackout’. Good, but not great. Still.

@ jg

Wisdom after the event is the easiest form. You risk starting another “we wuz robbed” syndrome. The “masters of the universe” to which you refer brought a sovereign nation to its financial knees. Getting it back on its feet will inevitably be an expensive lesson.

There’s an awful lot of morning quarterbacking going on this thread coupled with a sudden spike in the number of UK commercial real estate investors.

I’d bet dollars to donuts that the very same posters complaining about NAMA’s speed in selling it’s only marketable assets would be moaning about it’s inaction if the inevitable next dip in the London market had happened by now (which is always plausibly 6 months away – remember when people worried about Greece and the euro break-up? What about the current BRIC credit crunch?). Anybody who was certain that London prices were going to keep rising two years ago – when a Russian bought the Rolex store in 1 Hyde Park for a sub-3% rental yield – is as big a clown as the developers that caused NAMA.

I for one am glad that NAMA is doing it’s best not to use my taxes to fund one-way directional bets on an over-valued London property market.

@Edward v2.0,lost me a bit,if investors were worried bout Greece and the euro break up they should have be selling/sold prime London property.
So under your investment theory London prices were impacted negatively by threats off a Euro break up?
Rolex give me a break it was a 12mil tiny deal,not worthy of comment a little ‘trophy”,hardly market moving was it,beneath one hyde park.
Any thoughts say on Eagle House-sold by NAMA 60mio last year-apts on the mkt at 400 each-est 16mil profit for the irish taxpayers-oh sorry its SOLD. h/t NWL.

@DOCM thanks looking forward to reading that,its called vision sadly lacking at NAMA they sold ALL the family silver for peanuts.

“The Battersea site was bought 12 months ago for £400m by a three-member consortium from Malaysia, which has said it believes the whole development will be worth £8bn by the time it is completed in 2024.”

For Edward v2.0 who thinks an itsy bitsy tiny little deal is indicative off a market trend…panic much Ed…

Just like Honohan’s article from a couple of days ago I expect, in the run-up to the Irish budget, a stream of articles from the usual suspects showing that “austerity is working”, “stay the course”, “90% done etc”. The vogue appears to be to point to the UK, either post-1945 or post-2010 as proof of the soundness of current Irish policy.

None of these articles will point out the fact that these periods of UK fiscal consolidation took place within the context of a concurrent huge monetary stimulus, which doesn’t apply to Ireland. Fiscal consolidation without monetary stimulus is what happened in the UK in the inter-war years, and which nobody will mention since that didn’t turn out too well.

So let’s look a bit more at the UK. Is there really austerity in the Irish sense? The UK do not plan to reach the magic 3% deficit/GDP ratio until 2018. They are supposed to reach it by 2015, but can happily ignore this since they cannot be subject to SGP sanctions, and they explicitly justify why they have no intention of trying to reach the 2015 target. As it stands they have one of the highest, if not the highest, deficits in the EU. If they were forced to reach the target by 2015 under threat of central bank retaliation what do you think would happen?

Now on to the monetary stimulus. The BoE owns nearly a third of UK Treasury debt, and interest payments on the national debt are 10bns lower than projected in 2010. The BoE/Treasury introduced a large Funding for Lending scheme to offer below market funding for banks to encourage lending. There’s also a Help to Buy scheme where the Treasury is underwriting portions of some new mortgages. Also inflation has been running along considerably higher than in the EZ, in the 3-4% range, instead of less than 2%. Taken together this is a completely different monetary context in which the (modest) fiscal consolidation is occurring.

Similar conditions applied in the UK post-1945 – the (nearly) balanced budgets were in the context of a large monetary stimulus and reflation along with plenty of financial repression tools that could be used to control the cost of the public debt and ensure negative real interest rates.

How many of the Irish pre-budget “austerity is the only game in town” articles will mention the monetary environment in which the austerity is occurring, and how fiscal/monetary policies have to judged as an integrated whole and not as a collection of discrete unrelated parts?

Finally the barometer to be used to test the soundness of policies should be employment/unemployment levels. Ireland is running at an unemployment rate double that of all the Anglo-Saxon countries, with significant emigration to those countries. How many of the pre-budget stay-the-course articles will mention that?

@ jg

You are monumentally missing the point, or least the one I was trying to make.

It is (i) that Irish banks, who had only the implicit backing of the Irish sovereign, has no business in this game (ii) it was essential to get out of it and (iii) the lesson learned would prove to be expensive.

That’s it!

@ JG

“The Battersea site was bought 12 months ago for £400m by a three-member consortium from Malaysia, which has said it believes the whole development will be worth £8bn by the time it is completed in 2024.”

That is estate agent talk. Sure wasn’t the Bottle glass factory worth more than Tokyo at one stage too ? Nobody ever lost money punting on property in London either.


I think @Bryan G was making the point, if I may, that staying the course on this particular racetrack will only lead to a lot of dead horses.

He had argued the point well in terms of the UK.


So you’re quite happy with lower growth and double unemployment compared to alternative fiscal/monetary strategies, with the Anglo-Saxon countries acting as existence proofs?

The silence around the need for a change in EZ monetary institutions/policies to align with the EZ-mandated fiscal consolidation is deafening.

Re the Battersea site. This site has a long chequered history and long before Johnny Rohan got over ambitious the same site brought down a few others. I cannot remember the details but it got major coverage at the time.
Some sites are just unlucky but perhaps the Malaysians can cash in before the next bust in London property which seem to happen fairly frequently.

@ Bryan G

Not at all! I just happen to think that the answer to our unemployment problems lies not in fiddling with the illusory levers of control of an economy but on long overdue reforms of a structural nature, the starting point being a rigorous review of the utility of government – i.e. taxpayer – expenditure. Glaring examples of the need for reform abound, not least the mistaken prioritisation of expenditure in the area of education.



You prove my point perfectly, by denying that monetary policy is relevant to whether fiscal consolidation can work or not. You appear to view its discussion as out-of-bounds or of no consequence. It’s a classic framing issue – broadening the frame means needing to deal with some inconvenient facts. Perhaps someone should tell those Anglo-Saxons that the levers they are pulling are illusory?

@seafoid,even mentioning arguably the last truly great development site in London with something in Dublin,is simply ludicrous.
@fiatluxjnr,hard to build in middle off a credit crunch,NAMA had numerous options,but as with all it’s London holdings dumped it at fire sale pricing.Its “rumored” NAMA got out whole on the loan,it was an old BofI deal they were in for 50%.They were so excited to exit cleanly that the mere idea off making a profit or pursuing other options was beyond their limited skill set.They blew it in London,long on Irish RE but limited or no exposure to a very dynamic and vibrant London mkt.

“LONDON: All 866 apartments under the Battersea Power Station (BPS) project, the mammoth redevelopment programme jointly launched here by Prime Minister Datuk Seri Najib Razak and his British counterpart, David Cameron, earlier this year, have been snapped up.”

@ Bryan G

Again, not at all! There are many hands on the lever in question as Ireland is participating in a monetary union and the Irish hand is certainly not decisive. However, absent concentration on the factors impacting on the real economy, the levers are illusory. It seems that the new governor of the Bank of England may be about to find this out.

Number of part-time workers has gone up by about half a million since 2008 I think. Number in full-time employment is about the same.

Assuming those numbers are real, then we’re looking at an awful lot of crappy part-time jobs there for the “recovery”. And as others point out, the UK has been applying monetary stimulus, rather different to what the OP calims is Osborne’s “win”.

@ JG

Battersea as Fiatlux pointed out broke several previous hopefuls. And do you remember the name Olympia and York ? This time is different , is it?
Best of luck to the Malaysians. It’s all about timing in and timing out.
But that 8bn is not book value.


Lots of crappy jobs which are the fate of people in their 20s.
I wonder if unpaid internships are included in the full time numbers LOL.
Neither the crap jobs not the internships do much for demand .

@Seafoid,nope the seller to REO got out whole,they had a VTB or vendor take back mortgage,the lenders BofI and I think Lloyd’s also got out whole.
Indeed very familiar with the Reichmans,they doing very well these days,unlike Ireland entrepreneurs are welcomed and given a second act in many places.
They picked themselves up after the bankers panicked,got back to work and did what they do extremely well,bit like what most the top NAMA developers will too….it’s Ireland’s loss a lot off them have emigrated never to return.
Paying taxes elsewhere,hiring people making money…

“Many men who find themselves bored with retirement pick up a hobby. Paul Reichmann decided to launch a US$4-billion investment company. Last month, less than two years after he supposedly walked away from the business, the restless 76-year-old patriarch of Canada’s most prominent real estate clan announced the formation of that new enterprise, PR Capital. Come spring, the company will stretch from Toronto to London to Luxembourg. On Bay Street, anticipation is palpable and rumours are flying about just what the great old man of Canadian real estate has planned. As the Financial Times put it recently, “The Canadian tycoon is back.””


However, absent concentration on the factors impacting on the real economy, the levers are illusory. It seems that the new governor of the Bank of England may be about to find this out.

His “problem” is that unemployment is falling faster than anticipated, and will be lower than 7% too soon. A “problem” a lot of EZ governments would love to have.

@ Bryan G

If you pull a lever, you should know the effect. Being forced to raise interest rates ahead of a durable economic recovery and in a manner which may strangle it at birth does not fit this description.

But why not sit back and enjoy the ride? The Osbourne bounce is a good news story for Ireland.


I should also point out that you are confusing the meanings of “illusory” and “currently unavailable”. The former implies that the levers should be put into the same category of things that includes leprechauns. The latter implies that something is broken and should be fixed.

My point wasn’t that investors panicked re Greece/others – it’s that there have been plenty of events on the horizon that could have derailed the UK but didn’t (or haven’t yet). While hindsight is 20:20 it has not been clear at any time in the past few years that the wave of central bank liquidity and Russian/Chinese money would continue to Q4 2013.

As to the Rolex store and skies falling on heads… You’re a property man so please answer me this – JLL pegs London prime commercial yields at 4% – do you think those are going 3% and NAMA should hold on? Secondly, can you recall an example of any country and any time where prime rates at or below 4% were sustained for say 10 years (I think the duration of NAMA?)

I call bullsh*t if you’re trying to tell me you wouldn’t taken a sub 3% yield for the Bond Street properties NAMA sold in late 2011.


Being forced to raise interest rates ahead of a durable economic recovery and in a manner which may strangle it at birth does not fit this description.

Another basic error – confusing “necessary and sufficient” (forced to raise rates with unemployment < 7%) with “necessary but not sufficient” (multiple conditions required to be satisfied before rates raised).

@Edward v2.0
The point is NTMA/NAMA justifies its horrendous large salaries by claming to be “different” exempt from any cutbacks in the PS.
They had a judgement call to make,hold in London or dump and run.
It’s simple they made the wrong call,promote someone….
Regarding,commenting on the specifics off individual deals,like Bond Street it also depends upon your exit strategy.Be a lovely property to say launch a REIT with…less said bout JLL the better but isn’t one their largest Irish shareholders the top man at NAMA…ok ok.
What you looking for free RE advice…hire me if you can afford me…

The above was a bit flippant,was literally on a treadmill with iPad here goes and apols.
There are always market forces involved,the old adage it’s never too early to make a profit applies.But they did not sell the entire portfolio.

Rolex,are you asking if the London market has topped and to expect a slow decline or a collapse,so sell everything ?
Correct the RE market is cyclical,hence averaging out is a strategy or sell the lot then at 4%….but they didn’t did they!

Bond Street,again it’s a one hit wonder too answer your question I would have made the buyer take some the garbage out too,why sell just one trophy asset stripping and devaluing the remaining portfolio.
Ahh to appease and confuse the masses ….or uninformed!

Reichmann..I’d forgotten the name. Good to see he has resurrected himself.
That wouldn’t happen in little old ire. He would have run rings around Johnny but still came undone on Battersea. I’m convinced there is a hex on it. 866 illusory apartments…I think I saw that in Dublin in the recent past. How long is the cycle in London property. Say from 1970 onwards? …10 to 15 yrs?

I spent a bit time in To or Toronto,they highly respected significant players in real estate.Nice family great developers.

They were know somewhat affectionately as the “dynamic duo” his partner Richard is very very sharp.In fairness built some decent stuff,the Ritz ain’t half bad for bit lunch,Google liked their building so much they bought it!

When RE markets get “boomy” the spread on secondary or tertiary stuff narrows,similar to say what happened to junk bond yields.Thats what you sell,there is always a market for prime London real estate.NAMA should have moved some the secondary stuff as yields will move out and fast,prime will hold value.

Regarding BPS-it’s going to get built absolutely,northern line extension helped.
Oh look JLL involved yet again…..Rob is x REO/Tresaury Holdings !

Oh Ed,the tenant bought bond st. not exactly an arms length transaction,NAMA was tangentially involved.

a fella I know just drove by Tresaury Building,says NAMA called a staff meeting,they all holding hands belting out the Fields Of Athn….nothing like applauding and cheering mediocrity.

This is the scariest thing not involving injury or death that I have read on the Internets in a long time.

Be afraid. Be very afraid.

NAMA is as useless as the Irish soccer team playing away from home.

Latest “victory” was selling the Chicago Spire loan to Related NW and Starwood capital for $35 million in a deal that would cause “systemic damage to the Irish economy” if the sales contract was made public in the Cook County courthouse.

I bet it would! Freedom of information my ass. We host an “evil empire”within – a country being killed by necrotizing fasciitis.

Agree, that’s very strange and worrying.

Whatever the rights and wrongs about NAMA’s strategy to date (and I could add to a long list with some Anglo /IBRC “woe-stories” as well), how Ireland /NAMA deals with the disposal of its enormous domestic balance sheet will be a plague on the country for years to come (and let’s also see how much of the IBRC portfolios…mainly RE…move to NAMA in the next 3 months…..). NAMA’s original function to free the banks for lending is a complete failure of course. It now serves as a (temporary) artificial propping up instrument for rents in Ireland. It has become the ultimate “kick-the-can”, institutionalized SPV, nowadays ingrained on a path that perhaps worked during the height of the credit crisis, but is incapable of adaptation to the emerging reality that we are well past that point and need a new strategy for the changed world nowadays. It has become a time-warped lost cause, only good for those employed by it (who can look forward to many more years of safe, well paid employment than originally envisaged by its original charter….PS “heaven”). It is widely discussed in those terms in Dublin business circles…..but will bully its way along under Govt protection….as did the management of the IBRC until the “foreigners” there ran amuck…….many untold /publicly unknown stories still to be revealed! What a country.

@ JG

“unlike Ireland entrepreneurs are welcomed and given a second act in many places’

Maybe whenever Ireland has the necessary regulation and bank resolution framework and auditing integrity in place there’ll be some scope for people to be given a fresh start.


On London prime, the prices are off the charts compared to the rest of the market. It will be interesting to see what happens when interest rates go up.

@ JG

“Not much worse that say getting your entire strategy wrong and flogging everything not nailed down,specifically highly sought sites,while hoarding RE in a morbid domestic economy.”

“There are always market forces involved,the old adage it’s never too early to make a profit applies.But they did not sell the entire portfolio.”

“Correct the RE market is cyclical,hence averaging out is a strategy or sell the lot then at 4%….but they didn’t did they!”

John, I’m not sure I follow you here – either NAMA is right to try and get out of London or it isn’t/wasn’t. Which is it?

Their strategy since May-11 has been to exit the UK portfolio within two years which is as close to immediate as you’re going to get – http://www.theguardian.com/business/2011/may/27/nama-ireland-commercial-property-loans . Since 2/3 of NAMA’s UK loans are against London assets they are doing exactly what you’re suggesting – selling the lot at 4%.

There has been enough about Nama on this thread.

The 80,000 net growth in UK jobs is all in full-time employment.

The number of part-timers seeking full-time jobs is at 1.45m, double since the start of the crisis. That’s 4.4% of the workforce.

On Wednesday, France cut its 2014 growth forecast and confirmed that it will overshoot deficit targets.

It’s convenient to say the comparative performance is explained by QE of £375bn.

The Eurozone is the UK’s biggest trading partner and it also took a hit from the debt crisis.

On jobs in Ireland, Joan Burton’s September jobs miracle is more illusion than reality.

Burton claims dramatic fall in jobless numbers; Fact or fiction?

@Edward v2.0
In the past 3 1/2 years they have not averaged 4% cap rates on the piecemeal sale off their assets in London.
They have hoarded and held Irish instead,wrong call.
Time will reveal all,we won’t agree so let’s agree too disagree.

@ Sarah

Swiss mortgages are usually set to pay off 1/3 of the balance by age 65 with the outstanding amount passed on to the descendants on death. There isn’t any life cover either. The methodology keeps prices incredibly high but the problem is that the mortgage payment is heavily exposed to interest rate jumps. Currently rates are 200bps below “normal”. Ireland and the UK don’t tend to have any institutional investment in residential property whereas in other countries on the continent those assets and their long durations are welcome on balance sheets.


In his ground breaking book “Breakfast with Anglo” the distinguished Irish developer and author Simon Kelly,son of posh Paddy Kelly and former resident of Shrewbury road, muses that in his 20 years in the business he never encountered a foreign investor — which is a reminder of just how homemade this crisis is.

@John Corcoran,Hi John hope things are good,as you are well aware that moniker ‘posh paddy’ was a bit of irish humor,in that someone i know is called ‘slim’ but that he aint’t !

Numerous ‘foreign’ investors did dip their toe in ireland but left,British Land was involved in Stephens Green Center the old slazenger site.The grand old duke owns a bit of “blanchardstown”,your own favorite those dastardly canadian life insurance outfits,who are fond off collecting usurious rents own a few bits and pieces.

John i don’t want to hijack his tread-well i do but-currently there are some yanks buying these days

NAMA has now been around for 3 1/2 years,plenty of time to have set up a platform in London to maximize value for Irish taxpayers.They could have explored Joint Ventures-JV’s-a REIT-developed instead of sold.
The dearth of strategic thinking is staggering,how about working with the original developers to realize the full potential instead off simply selling.Its the easy option.

If two funds had been established with a similar asset and geographic mx 3 1/2 years ago.
The ‘paddy’ fund held all their irish RE simply mothballed it,but sold everything in London As Is.
The ‘yank’ fund sold their irish RE via a REIT,and JV’d and developed their London holdings…..

oh well its Ireland,where no decision is ever scrutinized.In the interests of ‘history’ who ever made what i think a a dumb decision to dump the London holdings,should be identified and say promoted or….

I agree with John. NAMA should never have acted with the fast side of whatever brain they have and adopted a “just sell” strategy in London. It was its best market, with its best assets. John McCabe’s City Road development was almost finished and NAMA sold it out to a developer who made an extra £16 million on it.

There were more sweetheart deals made between Receivers in London and their old school chums than hookers make on a good night in Amsterdam. The “Paddies” were considered suckers when they bought and again when they sold. I wrote two years ago that NAMA would be left with the dross, having sold the cherries for pennies and I also agree with John Corcoran (for once), Ireland is not a market that foreign investors are comfortable in. The present “interest” is an opportunistic one. The vulture funds wait on the sidelines with liquidity to buy assets below value from departing banks and NAMA. They will hold just long enough for Irish banks to re-enter the market and put money in the only place they understand – property, with the only investors who are here for the long term – the Irish, then they will take their profit and leave.

If NAMA was any use, it would be utilising the methods of the funds and collecting those profits for itself. I hesitate to use the phrase “Irish taxpayer” because NAMA is majority owned by investors and not the “taxpayers”, who only shave a minority interest (despite the spin).

@ Bryan G

We had also better agree to disagree!

The government has now announced its proposals for Dáil reform. Courtesy of Paul Duggan’s blog, the text.


What has this to do with the austerity debate? The answer lies in the fact that Ireland faces years of draconian budgetary management and the place to thrash out how it is done in an equitable manner is in the directly-elected house of the people’s representatives.

The proposals are a start (it being largely irrelevant whether the Seanad is abolished or not).

It is curious in the extreme to witness the attitude of top dog the government adopts relative to the Dáil, almost willing to be seen as doling out concessions. The penury confronting the country may eventually force respect for the Constitution.

“Article 28.4.1 and 2

4. 1° The Government shall be responsible to Dáil Éireann.

2° The Government shall meet and act as a collective
authority, and shall be collectively responsible for the
Departments of State administered by the members of
the Government. “

Dying Of Austerity…should be a good read.
Ambrose today…
“So, we now know: Silvio Berlusconi seriously floated plans to pull Italy out of the euro in October/November 2011, precipitating his immediate removal from office and decapitation by EMU policy gendarmes.
Ex-ECB insider Lorenzo Bini-Smaghi has quietly dropped a few bombshells in his new book Morire di Austerita (Dying of Austerity), worth a read if you know Italian.
Mr Bini-Smaghi – until recently on the ECB’s six-man executive council, and for many years Italy’s man in Frankfurt – states that Silvio Berlusconi was toppled as Italian premier in November 2011 as soon as he began to rattle the EMU cage in earnest.
Specifically, he discussed (threatened?) Italian withdrawal from the euro in private meetings with other EMU governments, presumably with Chancellor Angela Merkel and France’s Nicolas Sarkozy, since he does not negotiate with underlings. (“L’ipotesi d’uscita dall euro era stata ventilata in colloqui privati con i governi degli altri paesi dell’euro”).
We have long suspected this. Now it is confirmed.”

And Silvio is still causing ructions.

I know how popular Tory economic policies are. But there is one small problem with the argument that Osborne’s austerity policy has been vindicated by economic recovery.

That is, he abandoned it. Or, more precisely, replaced it with a very bad version of ‘stimulus’, which increased government consumption while cutting government investment.

Since the end of 2011 real government consumption has increased by £15.1bn (c.1% of GDP) and aggregate GDP has increased by £14.8bn over the same period.


Whatever judgement is made about the scope or composition of the recovery, it’s hard to argue that it vindicates ‘austerity’, or at least hard while refering to the facts.

@ Fiatluxjnr

Jaysus, you’d frighten a horse from a feed of oats!

Sometime back Trichet said the recovery would be bumpy.

The recent labour force participation rates data is interesting: the US level fell to 63%, the lowest since 1978; France is at 56%; the UK at 64% and Italy at 49%.

italy is helped by a big black economy and France’s level is likely helped by better pensions than in the UK

@ Flj

At one point AEP says “perhaps I am a bear of very little brain” which I do not think is true. But what is true is that it is a lesser brain than that of LBS. What AEP unwittingly confirms in quoting extensively from the book by LBS is that there is no exit from the euro, either for creditor or debtor nations.

The tug-of-war is about who bears the cost of bringing the system back into balance i.e. restoring sufficient confidence in its continuing existence to allow normal private capital flows finance its operation.

Perhaps you are right….the pact with the divil. No exit. Interesting that Lorenzo is telling all. But it’s not over yet. Looks like Slovenia is next for a bank bailout…it’s small, only 7b but they could try the Cypriot route. Bound to be hot money there. Greece requiring two more bailouts and Portugal yields over 7% barely causing a stir…we live in interesting times.

Just looked at Portugal. Closed at 7.23% for 10 yr. How come Mario has not unleashed his unlimited buying…was it a bluff? They can hardly exit their bailout with such yields.

Great article…gives a different slant on Mickey. This bit is interesting ..

“There are several different ways to be a country in trouble in the euro zone. Spain insisted it was not in trouble at all. Portugal asked for help, but then couldn’t quite bring its deficits down. Greece hanged Angela Merkel in effigy, then played crazy—if you don’t give us a better deal, we may just accidentally set this whole house on fire. Ireland meekly accepted its guilt and its fate, declined to demonstrate or riot, and, since the bailout, has consistently hit its quarterly targets for the IMF. If Greece was the pyromaniac child, Ireland’s been the good son.”

Hope he succeeds.

@Fiat it’s very very very interesting….the posed photo is symbolic,looks like hes waiting go to confession,all that’s missing is a cross overhead to complete the catholic guilt imagery.Expect to hear loads bout this,the timing had been subject off much barroom banter and chat,so they were not insolvent then, he offered shut it….

“.. In September 2012, before an informal meeting of European finance ministers in Cyprus, Noonan scheduled a roadshow that took him to Rome, Paris, and Berlin. A meeting with Wolfgang Schaüble, Germany’s finance minister, went well. “I’ll meet you in Cyprus,” Schaüble said to him, “and we’ll talk to a couple of people.”
With Schaüble’s help in Cyprus, Noonan pulled aside Jörg Asmussen, a German on the executive board of the ECB and a likely holdout on Project Red. After several hours, Noonan offered a symbolic concession. Would it make a difference, he asked, if the IBRC were to lose its banking license? “And [Asmussen] says, ‘Yeah, that would make a huge difference, because we’re no longer dealing with a bank,’ ” says Noonan. That way, Project Red can’t be a precedent for other banks in other countries. Ireland’s prime minister, Enda Kenny, announced the deal on Feb. 7, 2013.”

@ Flj

Any belief that Ireland has suddenly been overtaken by an attack of competence in political and media circles would be misplaced.

The only real story is the following.


The confusion with regard to the operation of the EU institutions, even by those reporting on them, is truly amazing after decades of Irish membership of the EU, the latest furore regarding a Commission competition enquiry in relation to corporation tax being the most recent example.

However, there is reason for hope not because of any change in either willingness or capacity on the part of politicians but because of the need to balance the books. The stumbling but increasing recognition that the Dáil must be in charge of the government, not the other way around, is a positive sign. That the electorate insists on maintaining an electoral system which tends to send representatives to it, almost without exception, incapable of dealing with anything other than local issues is a problem which it may also come to recognise has to be changed.


Your linked article answers my question above on Portugal. Seems they are not eligible for OMT either as they are not in an ESM programme.
But have faith…MN found a way last time (banking license) and Asmussen seems to be inviting an Irish solution.

Portugal are now at 7.25% for 10 yr. As they are exiting at about the same time as us it would appear our exit strategy could be impacted by their lack of access to markets. NTMA have gone very quiet on that front. So outside forces (portugal) could be a big problem.

As regards the alleged increasing recognition that the Dail must control the government, I would not have much faith in the utterances on law by Enda whilst brandishing the Constitution. Seems like a narrow literal interpretation.

@ Flj

What Irish politicians say or do not say is rather irrelevant when the company that they run is in administration. What the administrator says, on the other hand, does.

The Constitution is absolutely clear in the matter. It would be astonishing if it was not. What is astonishing is the deformation in perception and debate which has occurred, as epitomised by the inane nature of the electoral posters with regard to the abolition of the Seanad.

@ JG

The ‘Administrator’ speaks. Fascinating and near totally comprehensive interview.Thanks for the link!

The two closing questions are of particular interest, dealing as they do with what many seem to view as the two central issues (i) international agreement on the appropriate “leverage ratio” for banks and (ii) looking again at the risk-less rating of government bonds (an issue to be tackled as far as Asmussen is concerned when the crisis is past).

One assumes that German banks, and the country’s one international bank, can get away with high ratios because of the solidity of the German sovereign and vice-versa with regard to countries in the opposite situation.

@Fiat it’s not going to be much fun w/o any money,court decision due after the elections.
@DOCM,conditions there will be,unless off course a solo run is contemplated,I’m sure a nice mid teen yield will attract some buyers !


“The Bank of England should take action to cap house price rises at 5% a year in order to prevent a dangerous new property bubble, reckless lending and a build-up in consumer debt, the Royal Institution of Chartered Surveyors (Rics) says.

In the latest stark warning about the housing market, Rics – which represents surveyors and estate agents – is calling on the Bank to limit house price inflation to rein in consumers’ and lenders’ expectations and give a clear sign of when the Bank would use its new powers to calm the market. This week, the organisation warned that house prices are rising at their fastest rate since their 2006 peak.”


What Irish politicians say or do not say is rather irrelevant when the company that they run is in administration. What the administrator says, on the other hand, does.

Dimwitted reactionary nonsense alarm sounds, is drowned out by all the other ones ringing.

I suppose it is a natural next step backwards from the mindset that frames the debate about national debt around the idea that state finances are somehow like household finances to latch onto the idea that the Republic of Ireland is a company in administration (rather than a state under attack from more powerful neighbors with opposing interests and their hands on the levers of monetary policy).

@ Flj

On the subject of legal opinions, there is welcome evidence of a return in the EU to the old adage “when all else fails, read the [legal] instructions!” both in the instance that you mention and the FTT. The FT has kindly made available leaked versions in both instances.

The UK, in particular, has been fastidious with regard to its own and others’ legal obligations, a fact often lost sight of in the eurosceptic debate.


The opinion on banking is rather more wordy.


The legal eagles will have noted paragraph 7 where another opinion is awaited on the issue of who gets the executive authority to decide (“Meroni” doctrine). It seems that the legal services of all three institutions involved in the decision-making process – agreed on the pattern of a division of powers common across the parliamentary systems of all democracies – Commission (proposer) and Council (of ministers) and Parliament acting by “co-decision” as the “legislature, are ad idem on the legal situation.

And Asmussen also agrees!

@ Flj

It seems that proposal from the Commission has “hit a wall of objections” in Vilnius, the wall in question being made up of Germany, the UK and Sweden, with the possible addition of Spain! Spot the odd men out.


Schaeuble needs also to explain how, if a treaty change is required in the German view, any article in the existing treaties could suffice as a legal base.

Avoiding giving any hostages to fortune ahead of what seems likely to be a closely fought election – with a grand coalition is probably the outcome – would seem to be the order of the day.

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