Winter 2013 QEO from NERI

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44 replies on “Winter 2013 QEO from NERI”

Contrary to general perception the last NERI forecast had the strongest growth projection for 2013 among the main forecasting bodies, at 1%, but this has now been cut to 0.5%. The 2014 forecast has been trimmed marginally, to 1.1%, and offers a significant contrast to that of the Department of Finance, not only in terms of GDP (the latter has a growth figure of 2%) but also in relation to personal consumption; NERI have no change in consumer spending against a 1.8% forecast from the Department.

The progress recorded on banking union in general will be an important background aspect to future economic developments.


Both ECOFIN and the Euro Group will meet ahead of the European Council to settle what are being described as “remaining” issues. The question of the role the ESM might play “was not discussed”, according to the press briefing.

Barnier for the Commission said that it would be presenting a proposal for a European version of the Volcker Rule in the new year.

@Brian Lucey

Re: Austrian Bank (Hypo Alpe Adria)

Very interesting happening on the horizon, it appears.

So, Aaa Austria is about to welch on a Promissory Note-PN (that is what a guarantees is, right?).
Ireland was ahead of the game. We converted the PN into a ‘half-fledged’ State bond. We should clip the the wings of that PN fairly quickly.
Lets do a Aaa Austria.

@ BL

From Alphaville.

“According to our understanding of the Austrian constitutional law, a default of a sub- sovereign would result in support by the Austrian government. We derive at this conclusion based on article 2(4) of the Austrian Federal Financing law (Bundesfinanzierungsgesetz) and article 81 of the Federal Budget Law (BHG), which obliges the Austrian debt management office (Oesterreichische Bundesfinanzierungsagentur = ÖBFA) to undertake financing operations for Austrian states and provide funding from such operations in case Austrian States are unable to meet their financial obligations. The respective obligation is based on article 42(5) of the Austrian Federal Constitution, which, according to legal literature, creates the basis for a mutual consideration between the federal government and sub-sovereign states.”

At least they are
a) publicly musing it
b) seeming to try.
I dont imagine they will take well to people ringing them sayng “A bomb will go off in Vienna”. Its the difference between a sovereign state and a crony ridden bog

@ JG

No wonder they were unwilling (with Luxembourg) to accept the proposal on taxation of savings interest!

@ All

The Eurogroup briefing devoted a good deal of questions to Ireland (and some the other programme countries). The comments by Regling and Rehn on post-exit surveillance are of particular, and sobering, interest (12 minutes in).

There appears to be a deal of confusion in the Irish media coverage between the possible role of the ESM as a backstop in the context of bank resolution and and in relation to direct bank recapitalisation. The implications for future budgetary and economic management are obviously considerable.

“For me, as Chairman of the Supervisory Board, insolvency scenarios, irrespective of who brings them into play, are out of question”, says Liebscher. Apart from the destruction of value within the bank one also needs to consider the unpredictable economic consequences if an insolvency scenario is actively accepted, not only for Austria as a business location for banks and for Austrian jobs but also for its neighbouring countries in southeast Europe.
The Task Force, which amongst its members also counts the Governor of the Austrian National Bank, Dr. Ewald Nowotny, has never submitted any scenarios to the Federal Government of Austria which would include liquidation measures.”

@ BL

The Irish and the Austrian situations are clearly not comparable, except in the context of possible contagion. The Irish government was incapable of rescuing its banks, the Austrian government is not.

Surely the striking thing about that ESRI Social Protection report is that the % of households receiving some form of social welfare payment was much the same in 2011 as in 2004.

@ Peter Stapleton

It is indeed striking but what is the conclusion to be drawn? That we have a permanent embedded benefits culture which continues in good times or bad? Those that have emigrated, both individuals and households, do not, of course, figure in the statistics.

re: ESRI report.

Why be alarmed that 87% of Irish households have a person in them who is either:

Under 17 (Child benefit, including families of billionaires)
Over 65 in year 2011. (incl billionaires)
Unemployed-JB (incl billionaires, though unlikely)
A lone parent.
About to give birth (Maternity benefit, incl Billionaires)
Working for Buttons (FIS-Payment)
Widowed (incl Billionaires)
Household member bereaved in past year (Death Grant, incl Billionaires)
Disabled. Disability benefit. (incl Billionaires)
Works in Private sector and was sick for more than three days in 2011 (now 6days).-Disability benefit ( incl Billionaires)

General question:

Why is JB (Job Seeker’s benefit) considered a social transfer.? In practice, one pays into a fund (PRSI), and the fund in theory pays the benefit.

Still, the thrust of the report is welcome and its conclusion that social transfers are very effective in alleviating poverty is intuitive, but very welcome nonetheless.


“Permanently embedded benefits culture” is the kind of EuroTory trolling that suggests to me someone is a little uncomfortable with the direction the thread was taking.

Someone gets a little antsy when bondholders interests are on the line.

@ Joseph Ryan

The two points that you make seem to me to be correct (i) misplaced emphasis on universal social welfare benefits (ii) a very good performance in relation to combating poverty.

There can be no getting away from the fact that the mix of government social expenditures is not right. Examples would be in relation to the absence of any government funded kindergarten facilities, which would certainly aid return to the workforce, and poverty traps of various descriptions. These issues have been well documented.

It seems to me also that there is an increasing public awareness that every penny has to be accounted for and questions posed as to whether it is being effectively spent. It is also interesting to note that Dáil committees are gaining de facto the budgetary influence that the government refuses to give them de jure. The Committee for Closing Stable Doors AKA the Public Accounts Committee is a good example.

@Joseph Ryan

Under 17 (Child benefit, including families of billionaires)

Remember the old political truism that benefits targeted just at the poor end up being poor benefits, universality is an important social glue.

Dealing with the greed of the undeserving rich can be addressed with taxation and publicity – perhaps anyone claiming these benefits on the top rate of taxation should go on a public register?

@Joseph Ryan

The means testing process is also a classic tactic of right to further marginalize the less well off – in a society with low social mobility the employed are less and less inclined to pay taxes for social welfare benefits they feel they are never likely to benefit them. It is a great wedge issue for the reactionary right in their efforts to shrink the state.

:absence of any government funded kindergarten facilities

free childcare not quite a year really is a start there.

Thats the dumbest statement youv made. The IMF are the pros from Dover. By contrast the ECB were a malign version of the Three Stooges. FFS …..

For once bL is right. Left to their own devices, the Axis powers in The core would have destroyed the EZ. Remember the original Loan T&Cs and the lecturing/hectoring about the corrupt untermenschen of the periphery. Just be thankful for the IMF. For without them your beloved EU would no longer exist. One surmises that cheques would no longer be posted.

@Shay Begorrah

“Dealing with the greed of the undeserving rich can be addressed with taxation”

Don’t waste the electrons. The moment anyone (generally me) suggest that maybe given our NATIONAL CRISIS we might want to consider taxing the rich at rates similar to, say, what they were in the 1990s the reaction is always:

1) That wouldn’t raise any money;
2) Begrudgery is such an ugly phenomenon;
3) Then the rich would leave!

Of you had Ernie’s salary and pension would you fall into that category. The PV of his pension alone must be into seven figures.

Thanks for reminding me, guys:

4) Personalise the issue and make it about the person raising the question rather than the question itself.

But Tull has devised a new one: act as if the fact that what I’m calling for would likely affect me is in fact somehow a strike against the idea, rather than proof that my calling for it is utterly disinterested. Disinterestedness is bias! Ignorance is strength!


“Undeserving” was Shay’s word. I’m happy to leave it out and call for increases in taxation on the rich, whether deserving or undeserving.

@Ernie Ball

“Undeserving” was Shay’s word. I’m happy to leave it out and call for increases in taxation on the rich, whether deserving or undeserving.

If we want to shift the Overton Window it helps if for every repetition of a right wing meme (“benefit scroungers” – the new undeserving poor, “paying our debts” – the former bailing out financial capitalists) we have a more powerful (more truthful) counter idea. The right are good at using repetition to make absurd and dangerous ideas acceptable (remember “expansionary austerity”?) and we need to counter that.

On a similar note.

@Brian Lucey to DOCM

That’s the dumbest statement you’ve made.

There is a second possibility, which is that this is an example of the second favourite game of the right, spreading lies (the number one game on the right is ensuring that wealth is concentrated and then swearing fealty to it).

Over at Simon Wren Lewis’s blog he has a post about electoral politics in the UK (The UK’s macroeconomic battleground to come) and the second poster makes a game attempt at explaining why the right talks so much nonsense.

An anonymous commenter:

The reality is that Right wing politics is by definition a charlatans game. Right wing policy is simply opposed to the wellbeing of the average citizen. The average man will never be wealthy and as such , a small state, less tax, more free market is not in his interest. Therefore in reality the Right cannot naturally have an electorate large enough to bring them into power. They have to lie and trick people into voting for them.

Think of it as propaganda and ask “What is it meant to distract from?” and “What issue is it meant to confuse?”. (Free kindergartens would be lovely but what jobs are the newly time rich parents supposed to get?)

@Ernie. I don’t particularly disagree with the term “undeserving rich”. But if we can agree on a definition of the “undeserving rich” then taxation needn’t punish anyone deserving.

Meantime, I love the way the report’s conclusion segues from commentary on facts to purely political principles like “the retention and strengthening of a progressive income taxation system”.

On the report itself, a number of things have been discussed or questioned before.
– the increase in “self employed” seems high. Explanations? Anyone?
– absolutely no reduction in mortgage arrears over one or two years.
– worrying drops in GNP, and particularly in domestic demand and retail activity
– ongoing high emigration
– low investment

The whole discussion on employment by occupation (p 40) makes me wonder if “grade inflation” is a major factor. Many of these new self-employed might – for instance – count as managers, directors or consultants rather than whatever they’re more concretely doing.

If all benefits doled out by gov’t are treated as income and taxable then the higher income end of the 87% are returning a not insignificant proportion to the gov’t.

Narrowly targeted benefits usually lack broad support and die an early death. If tax revenue needs to be increased I would look first at the 12.5% and as low as 3% corporate taxes. Raising corporate taxes to 18% over five years in the interest of spreading the pain to alleviate personal income tax being seen as carrying too much of the burden makes a lot of sense. It is unlikely that there would be an exodus of foreign owned enterprises except for the ones registered with Irish lawyers without any visible sign of employees or physical presence. No loss if they depart, it might improve our standing as to not being a tax haven.

@ Hugh Sheehy

On the rise in self-employed numbers (28,400 without employees), some relates to under counting of farming numbers in earlier periods plus participants in activation schemes, people who can’t get what would be regarded as real jobs, people involved in startups and semiretired looking for nixers such as early retirees from the civil service.

In the UK, the Financial Times reported in November 2012 that employment in professional occupations – – which include lawyers, accountants and management consultants – – had grown more than 230,000, or 4.4%, since early 2010, the fastest increase of any group.

The second fastest rise had been in associate professional and technical occupations, which range from engineering technicians and IT support staff to financial advisers, graphic designers and sports coaches. Managers had also grown in number.

The sharpest decline, of 160,000 or 4.8%, had been among administrative and secretarial staff. Process, plant and machine operators were fewer, as were skilled trades, which include electricians and machine fitters. But at the bottom end, what are termed elementary occupations – – a category that includes waiters, bar staff, kitchen assistants, security guards and cleaners – – were up 2.5%.

You will note from the Troika’s 8th review issued last December that stagnant growth quickly escalates into an ugly picture…see the graph at the top of page 12. Which is one of the reasons John McH and the Fiscal Council previously recommended taking more cust /taxation pain to maintain a safety buffer (which the Govt didn’t do).

Interesting too is that the chart shows Debt /GDP at the current 2013’s 124%.

Industrial production has fallen heavily in October and November……Is all opf that pharma?

Should add that we were being told at the end of 2012 that Ireland’s Debt /GDP ration would top out at a smidgen over 120%…Well above that already, and moving north!

@Shay Begorrah / @Mickey Hickey

“Remember the old political truism that benefits targeted just at the poor end up being poor benefits, universality is an important social glue.”

“The means testing process is also a classic tactic of right to further marginalize the less well off – in a society with low social mobility the employed are less and less inclined to pay taxes for social welfare benefits they feel they are never likely to benefit them.”

I confess that those issues never occurred to me, but following reflection I can see how real they could be.

My understanding of some of these issues was based on way CAP funds found their way into the hands of extremely well off farmers, public companies and all the way to the British Royal family, who were the biggest beneficiaries.

As MH points outs most benefits are now taxable, so that up to half of the funds come back to the exchequer immediately.

@ Shay Begorrah

And don’t forget: increasing hoops like means testing is terribly inefficient and wastes money in the program [1], admittedly a feature not a bug for the right-wing hacks who campaign against social welfare on behalf of their masters, both in terms of propaganda and in the real world actually increasing the difficulty of everyone to access it, and exponentially more the poor (who have less time and resources to “navigate the bureaucracy”).

[1] consider that a progressive taxation system has actually already addressed the ability of the rich to afford to pay more of their share already.

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