Q3 Mortgage Arrears Statistics

The latest update of the mortgage arrears statistics has been published by the Central Bank.  See here.

For the first time since the series began the total number of PDH accounts in arrears shows a quarterly fall (142,892 to 141,520).  This is a result of the slow-down in new arrears cases seen in recent quarters.  The situation of those in existing arrears continues to deteriorate with another significant increase in the number now 720 days or more in arrears (28,860 to 31,834). 

The outstanding balance on mortgages in arrears is €25.6 billion, of which €18.9 billion are in arrears of 90 days or more.  The total amount of arrears rose from €2.02 billion to €2.17 billion.

The total amount of PDH mortgage debt continues to fall and is now at €108.5 billion, compared to €118.6 billion when the series began in September 2009.  Capital repayments on existing loans are offset by new lending so the rate of capital repayment over the past four years has been substantial.

Interest-only or other reduced payment options remain the most utilised restructuring options though the number of accounts these were applied to fell from 44,805 to 37,643 over the quarter.  In relation to the overall drop in the number of PDH mortgage accounts in arrears it should be noted that restructuring through arrears capitalisation increased from 13,627 to 16,146 accounts.

In the Q2 data it was reported that there was 254 permanent interest rate reductions for PDH accounts.  Today’s release says that just 16 accounts now have a permanent interest rate reduction applied to them.  The number counted as having a temporary interest rate reduction increased from 870 to 1,426.

The number of split mortgages rose significantly from 306 to 1,154 over the quarter.  Term extensions remain the most used permanent restructure increasing from 14,630 to 15,447.

There are now 6,325 in ‘Other’ restructures (up from 2,300 in Q2).  This category “mainly comprises accounts that have been offered a long-term solution, pending the completion of six months of successful payments.”  Many of these are likely to be split mortgages agreed during the quarter which will move into that category on successful completion of the probation.

At the of September there were 80,555 restructured PDH accounts and 78.9 per cent were deemed to be meeting the conditions of the restructure.  There were 76 forced repossession in the quarter and 133 voluntary surrenders.

Data on the Buy-to-Let sector is also included in the release.

Wage Flexibility in Ireland

Donal O’Neill, Olive Sweetman and I have been working on the issue of wage flexibility in Ireland, and have put our initial results into a working paper. Here’s the abstract:

There is considerable debate about the role of wage rigidity in explaining unemployment. Despite a large body of empirical work, no consensus has emerged on the extent of wage rigidity. Previous attempts to empirically examine wage rigidity have been hampered by small samples and measurement error. In this paper we examine nominal wage flexibility in Ireland both in the build up to, and during the Great Recession. The Irish case is particularly interesting because it has been one of the countries most affected by the crisis. Our main analysis is based on earnings data for the entire population of workers in Ireland taken from tax returns, which are free of reporting error. We find a substantial degree of downward wage flexibility in the pre-crisis period. We also observe a significant change in wage dynamics since the crisis began; the proportion of workers receiving wage cuts more than doubled and the proportion receiving wage freezes increased substantially. However, there is considerable heterogeneity in wage changes, with a significant proportion of workers continuing to receive pay rises at the same time as other were receiving pay cuts.

The full paper is linked here.

Edit on December 17: link changed to working link

Collins -v- The Minister for Finance & Ors

Judgment here.

UPDATE. The following is probably also relevant here:

Bond Repayments: Motion [Private Members]

    “That Dáil Éireann:

      calls on the Government:

    — to immediately lobby the European Central Bank for a one-off exemption from the rules of monetary financing, to allow the Central Bank of Ireland to destroy the €25 billion in sovereign bonds issued in February of this year, in lieu of the remaining promissory notes, plus the €3.06 billion bond also being held by the Central Bank of Ireland in payment for the 2012 promissory note; and

    — to cease any and all interest payments currently being made on those bonds.”

    The first part of the debate on this motion is available here.
    UPDATE 2: The final part of the debate on the above motion is now available here.

QHNS Q3 2013

The CSO have published the latest Quarterly National Household Survey: Press release and Main release.

Employment is up 58,000 in the year.  Full-time employment accounts 53,500 of that.  Concerns about the distribution of the numbers employed into each sector remain (particularly the Agriculture, Forestry and Fishing sector).  There was a 30,200 increase in the numbers self-employed and a 27,300 increase in the number of employees.

Unemployment using the QNHS is now at 282,900, a drop of 41,700 over the year.  Self-classified unemployment is at 326,700 down 45,000 in the last 12 months.

The unemployment rate was 13.0 percent in Q3 (seasonally adjusted 12.8 percent).  Using the Live Register the CSO project that the SA rate in October was 12.6 percent.

The labour force has increased by 16,000 in the same time with a 0.5pp annual increase in the participation rate to 60.7 percent.

The number unemployed for one year or longer fell 27,800 of which 25,800 were males.  The long-term unemployment rate is 7.6 percent (8.9 percent a year ago).

Youth unemployment (15-24) has fallen from 74,000 to 60,400 with the youth unemployment rate at 26.5 percent.  The youth unemployment ratio is 10.3 percent. 

There is lots more detail in the release.  The Earnings and Labour Costs Survey for Q3 has also been released.

The Future of Banking in Europe Conference

The Institute of International and European Affairs will host a conference in the Convention Centre Dublin on Monday, 2 December that will feature a series of keynote addresses and panel discussions to consider the rapidly changing banking environment in the context of the proposals for a banking union in Europe. The implications of these developments, including what they mean for the future of the euro, the management of financial crises in the Eurozone and the likely impact on businesses and individual consumers, will also be addressed. Additional details can be found here.

Baucus Unveils Proposals for International Tax Reform

The chairman of the US Senate Finance Committee, Max Baucus (D) has published some proposals for reform of international aspects of the US tax code.  There is lots to read here

This six-page summary is a good place to start. It is probably better to stop before you get to the 85-page technical explanation from the staff of the Joint Committee on Taxation. 

One could look for possible implications for Ireland through the references to foreign income, Subpart F, “check the box”, the “same country exemption”, the CFC “look-through rule”, inversions or section 482 (transfer pricing) and other provisions in the US tax code that we have heard about but don’t fully understand.  However, there are lots of reasons why this set of proposals may not get very far.  Trying to find a word of support in the statement from the chairman of the House Ways and Means Committee, Dave Camp (R) is one and the impending retirement of Baucus in 2014 is another.  The point is simply that the debate is not standing still even if actual reform still appears to be a way off.

Here is a report from Bloomberg on the proposals.

John Corrigan on OMT

In an interview broadcast today as part of RTE’s This Week show, NTMA chief executive John Corrigan made some comments on the OMT programme.

Colm Ó Mongáin: If we had applied for extra conditionality we would have qualified then for this European Central Bank bond-buying programme so was there any sense that applying for a credit line would offset the risk that were there trouble further down the line and a spike in European bond yields we would be ok because the European Central Bank would be able to buy Irish bonds?

John Corrigan:  Well, the take on that is … is unclear in the sense that the OMT, which is the jargon for it, which is the programme operated by the central bank, which hasn’t been triggered yet, the precise terms and conditions for accessing that haven’t been laid down, number one. And number two, that programme is designed to address systemic issues which might arise in the markets. So, if, even still we were caught up in systemic issues as part of a wider problem to the extent that OMT was triggered we would still be in line to benefit from that.

Most of the ‘what if’ scenarios raised this week following the decision not to pursue a precautionary credit line focussed on domestic concerns about the Irish economy rather than systemic ones for the euro area. 

The question seemed a perfect opportunity for John Corrigan to say that Ireland is already eligible to be considered for OMT without the necessity for the additional conditionality that a precautionary credit line might bring.  He is right that “the precise terms and conditions haven’t been laid down” but we do have this very brief outline of OMT which provides some guidance on which countries are eligible to be considered for OMT.


Outright Monetary Transactions will be considered for future cases of EFSF/ESM macroeconomic adjustment programmes or precautionary programmes as specified above. They may also be considered for Member States currently under a macroeconomic adjustment programme when they will be regaining bond market access.

It is pretty obvious that Ireland is covered by the second sentence.  As part of the existent EU/IMF programme there has already been strict conditionality imposed on Irish policy for 2014.  If there is an asymmetric shock that hits Ireland which can be alleviated by central bank bond purchases then the ECB’s Governing Council can decide to activate OMT for Ireland. This week’s decision had no impact on that.

As long as Ireland is “regaining bond market access” (which is admittedly subjective) then Ireland is eligible to be considered for OMT and a credit line is not a necessity for it.  It is not clear to me why John Corrigan did not say as much today.

Globalization and the Great Moderation

Paul Krugman has an interesting and alarming post here, in which a key question that is posed is: “So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures?”.

I have often thought that China may provide a partial answer to the question: an elastic supply of Chinese workers meant an elastic supply of Chinese goods, that were vented onto Western markets at a fixed exchange rate and financed by internationally mobile capital. Presumably many others have said something similar in the past, since it seems like an obvious point to make. I wonder if you could make the case that similar forces were — at least at part — at work in the 1920s, with an overhang of primary products on international markets following the disruptions of World War 1 helping to keep a lid on commodity price inflation. (The international monetary context was obviously very different.)

And, while I’m not a theorist, it has often struck me that it wouldn’t be so surprising if inflationary pressures that don’t show up in commodity prices showed up in asset prices instead.

I was once at an after-dinner talk by Tommaso Padoa-Schioppa in which he said something similar, and then went on to make the point that whereas commodity price inflation is self-limiting — it makes us unhappy, and tends to lead to retrenchment by private agents and/or central banks — asset price inflation makes us happy and encourages expenditure, and is thus a process that feeds on itself (until it goes into reverse).

If there is anything to this, then when China and the rest of Factory Asia eventually hits its “Lewis point“, Western inflationary pressures may once again begin to show up in commodity price inflation. If Western economies were less able to finance imports from Asia, or if their currencies started weakening, then something similar might happen. Perhaps that wouldn’t be such a bad thing.

Fishamble’s “Guaranteed!” by Colin Murphy on national tour

via Gavin Kostick in comments, earlier

Fishamble’s production of ‘Guaranteed!’ by Colin Murphy is back on national tour, starting at Kilkenomics this Friday. First panel discussion includes Bill Black and Dan Ariely.


Annual Conference of the Economic and Social History Society of Ireland Nov 22nd/23rd 2013

The Annual Conference of the Economic and Social History Society of Ireland is being held in NUI Galway on Friday 22nd and Saturday 23rd of November, convened by Niall Ó Ciosáin and Caitríona Clear.

Registration/booking information and the conference programe are available at:


The Society’s main web page is here.

Italy eyes ‘Google Tax’ to help fix public finances

Using standard provisions in tax codes internet companies face low or no corporation tax bills in the countries of their customers.  This issue has been repeatedly raised in the UK by Margaret Hodge, chair of the Westminster Public Accounts Committee.  In relation to Google in particular much of the focus has been on whether Google has a permanent establishment in the UK.

This issue is also agitating the chair of the Italian lower house Budget Committee, Francesco Boccia, who has drafted a bill to try and force companies like Google to engage with their customers in Italy through a party that has a permanent establishment in Italy.  See this report from Reuters.

The proposal would not tax the multinationals directly but would force them to use Italian companies to place their advertisements, rather than doing so through third parties based in low-tax countries like Luxembourg, Ireland or outside the European Union.

Doubts about the feasibility of such a proposal seem justified but it does show someone trying to take some action on this issue.

EC Autumn Forecast 2013

All the documents can be accessed from here.

The main figures for Ireland (“rebalancing on track”) are:

Among Euroarea countries six are expected to face a BoP current account deficit in 2014: Estonia, Greece, France, Cyprus, Latvia and Finland.  The largest deficit is expected to be in Estonia at 2.2% of GDP.  On the other side Germany, Luxembourg, the Netherlands and Slovenia will have a current account surplus of more than 6% of GDP.  The first three will have three-year averages greater than the 6% of GDP threshold set out in the Macroeconomic Imbalance Procedure.  In aggregate the euroarea is projected to have a current acount surplus of around 3% of GDP for the next two years.

The Spanish public deficit is forecast to increase to 6.5% of GDP in 2015 with France, Cyprus, Malta, Slovenia and Slovakia also projected to have deficits in 2015 over the 3% of GDP threshold for the Excessive Deficit Procedure.  In aggregate the Euroarea is expected to run a public deficit of around 2.5% of GDP for the next two years with public debt steady at around 95% of GDP.