MTES 2014-2020

The Medium Term Economic Strategy for the seven years to 2020 is available here.

The main projections are in this table

56 replies on “MTES 2014-2020”

Even with growth ratcheting up to 3.5% by 2020 the debt as a % of GDP is projected to be at 93%.

There doesn’t seem to be much margin in there.
It all depends on growth turning up.

No serious reform or even acknowledgement of the roadblocks either- PS management , legal system weakness, general absence of accountability, over centralisation of government , whatever you are not having yourself . I wonder how much these pathogens suck from GDP growth
each year.

This unimpressive effort has surprised me even though I had expected a promotional brochure rather than a strategy.

On presentation, DoF should have asked Rossa White at the NTMA for help.

The word ‘must’ appears 13 times and ‘weakness’ once. “We must find ways to foster greater innovation…”

It lacks any attempt at SWOT analysis: strengths, weaknesses , opportunities and threats. Without that it could never be termed a strategy.

It’s interesting that it avoids claims on services exports resulting from competitiveness and it acknowledges on productivity that: “Different methodologies will lead to different results.”

Less than 3 years in power and the ideas tank is running on empty. 🙄

Irish Medium-Term Economic Strategy 2014-2020: Government publishes brochure not strategy – Part 7

As KO’R has previously posed, how is Officialdom allowed to “factualize” future projections in such an optimistic way…….and then afterwards say, “ah well, we based our figures on the “facts known at the time” but matters outside Ireland’s control then changed the game…..

It’s clear that it all depends on growth……and Ireland’s ability to borrow in the markets. This is clearly aimed at market investors……but with tapering coming soon, it has big downside potential…..they end to run really fast to stay ahead (?) or even in touch with the game.

At least the big turn required is 2013 /2014…….

@ Paul W

Japan may have looked similar 15 years ago – 120% debt, lots of puff about concentrating….the punters bought the bonds anyway…. not so much growth..plenty of deflation … now debt is well over 200%….
If it can happen in Japan why not in Europe ?

Clearly Europe is facing that moment……2014 is beginning to “feel different”….in fact, financial types here in NYC are taking some money off the table (personally), while it is clear that the large institutional investors are rotating out of US equities…in the meantime, we are told that the retail investor is entering…..always a bad sign!

In the meantime, Nero fiddles and spins…

Rah, rah, rah…..the headlines have changed already now that the troika have exited… it up is policy. Do they really think market investors are swayed by this rubbish?

The average growth rate projected over the period , at 2.9%, is actually well below the 4% forecast by the ESRI in its latest medium term review. History suggests that events will render the projections redundant anyway but it is interesting that the structural deficit, at 6.5% in 2013. is seen to fall to zero by 2018, as per EU rules, which will prove a fiscal constraint on whoever is in power.

Not just the government. The household and corporate sectors will continue to de-leverage too over the next decade. If we do hit a 2.9% CAGR over a 5-10 year period then that would be fantastic, but it seems quite a stretch to make that the base case forecast.

Despite the rather obvious attempt at political point scoring, the document is mercifully short and contains a good deal of factual information on the constraints that should see an end to auction politics.

The key sentence (page 20);

“The path of fiscal recovery is dependent on economic growth materialising both domestically and internationally. Therefore, within the strict overall
budgetary constraints, taxation and expenditure policy must be oriented
to continue to support economic growth and job creation.”

The data, or rather the lack of it, on public sector reform, is disappointing.

When contrasted with the performance of other programme countries, however, the work of the Irish government has been stellar.

Of interest in terms of maintaining pressure for reform, this link.

As Simon Nixon of the WSJ has commented in a recent article, the pressure for the promotion of growth in Europe is now intense.

“..two factors helped concentrate the minds of European governments in recent weeks as they thrashed out important details of the euro zone’s proposed banking union.

The first was the European Parliament elections scheduled for May next year. These are expected to result in large gains for euro-skeptic and extremist parties, which could make it much harder to agree on complex legislation involving a substantial pooling of sovereignty.

The second is growing anxiety in the markets and among some policy makers that the euro zone is sliding into deflation. With interest rates already close to zero and no easy way to further loosen monetary policy, a credible banking union is the euro zone’s best chance to reduce financial fragmentation and reduce borrowing costs in the periphery.”

It’s the Santa Claus time of the year…..easy to talk growth, as opposed to creating it. Even if QE were a real possibility for the ECB, we have seen from the US that financial assets benefit in reality, and it has taken a few years to generate even that.

As Carson says, deleveraging will continue to retire money creation and demand. Govt austerity will do likewise. Risk taking has been largely sidelined. Is that not understood yet!

On the subject of central bankers overstepping the mark:

‘Three key truths about the bailout which we are only learning now’
Fintan O’Toole

“The first thing we’ve learned is that, as many of us argued all along, the blanket bank guarantee of 2008 was a catastrophic error. It was not an inevitability or a tough and courageous decision. It was just a mistake. Who says? Well, Olli Rehn, EU economics commissioner and one of the chief architects of Irish strategy since the crash, says so – now: “In retrospect I think it is quite easy to spot some mistakes like the blanket guarantee for banks.”

“Thanks a million, Olli – so that means that the whole strategy that flowed from the guarantee is also a mistake and must be fundamentally re-evaluated?

“No – “that is now water under the bridge and now we have redirected the river and we are on [sic] a better place for the moment”. But of course, the river has not been redirected – everything continues to flow from the mistake that is now, apparently, so easy to spot. Ireland cannot be allowed to correct a mistake that will harm its people for decades.”

@ Paul W

I would not disagree. I am simply making the point that Merkel and Schaeuble cannot continue with the line that they have been adopting since the crisis began i.e. mandatory reform and austerity for the debtors, zero reform, and no action to stimulate economic activity in terms of their domestic markets, by the creditors. Draghi has been making clear over the past few weeks the limits on what the ECB can do and putting it up to them to move, most notably on the use of the ESM as a backstop for the Banking Union.

@ GK

“Ireland” made the mistake or, rather, its elected government did. Who do you and Fintan O’Toole think should pay for it?

I read through this so-called plan in high hopes of evidence-based analysis of the economic problems and issues with which we are confronted as a society and an expectation of some application of critical thinking to their resolution. But oh dearie me! It all reads to me like a fair summary of government department press releases over the past two and a half years. The best to be said of it is that it’s a fine compendium of the blather regularly emanating from the depths of Government Buildings to which we’ve grown all too accustomed. The sidebars in each section – where we need to go now…how we’re going to get there – or some such ‘marketing speak’ presentational nonsense reminds me of an old Monty Python joke along such lines, of which the punchline is : “Do we have a map?” Or perhaps more appropriately that old Kerry joke about a man giving directions to a American tourists to the effect that : “Well now, if that’s where I was going, I most assuredly wouldn’t start from here!”

Some of the signposts in this particular ‘road map’ to our future of gorwth, prosperity and full employment and heavenly bliss – eventually – are truly frightening. Every time I see a reference to ‘New Era’ and what they propose to do with the last few bob left over from the pensions reserve fund, I experience a peculiarly sickly feeling…

Presumably though, there’s some brilliant analysis backing all this up and some bunch of economic consultants are looking forward to a very merry Xmas on the strength of all their ingenuity and hard work in helping to put this plan together, bless them.


I don’t know what Fintan O’Toole thinks, other that the articles, though I could ask him as could you.

The inverted commas around Ireland that you supply suggest a pathway to a more complex answer.

Indeed. You’d have to believe that the same Trichet who wouldn’t countenance burning bondholders in 2010 or in 2011 was somehow agnostic on the question and kept shtum in the teeth of the crisis in 2008. That doesn’t seem credible to me.

@ GK

Indeed they do! The question they pose is how could we have ended up with a system of government which allowed for such a mistake? And a second; have we changed it sufficiently to ensure that the mistake will not be repeated?

My answer to the second question is no. The answer to the first will be for the historians, at the present pace of inquiry. IMHO we do not want to know the answer as it would hold up a very uncomfortable mirror.

The Fiscal Advisory Council advises us on its website that “The mandate of the Irish Fiscal Advisory Council is: To endorse, as it considers appropriate, the macroeconomic forecasts prepared by the Department of Finance on which the Budget and Stability Programme Update are based …”

Has the FAC endorsed the economic growth projections on which this new document is so dependent?

I am not sure what your obsession with the forecasts is about. They are by ðefinition wrong. If the global economic recovery spreads from the properly run economies in the Anglo Saxon world to the omni shambles world of the EZ then they will almost inevitably be too low. If on the other hand the German axis remains in control of the EZ then they will be too high and we will default and leave the Euro. At the moment the needle points towards the former scenario, given the ascendancy of Draghi in the EZ but it is finely balanced.

This report does provide a useful service, it allows the doom port merchants and the national association of whingers to have one more works outing before Christmas.


You can make a good case that the forecasts are too pessimistic. But you can make an absolutely iron cast case that any medium-term forecast from any source will be wrong. In fact it is fair to say that we have no idea what the true GDP for 2012 will turn out to be in 5 years time.

Complaining that about the accuracy of economic forecasts is like complaining about the weather forecast – only people who like complaining do it.

Re: The SME section of the ‘Strategy fro Growth’

No attempt is made is made in the document to comment on let alone address a number critical issues that need to be addressed in the SME sector in the short to medium term.

1. The current doom link between SME’s and the property loan distress of the SME equity holders.
Good and potentially good SMEs are being held back and destroyed, by the extraneous loans of the owners.
This issue should be tackled, through legislation if need be, to ensure that healthy companies cannot be pilfered by either equity holders or banks, where jobs are at stake. The examinership process needs to be made more legislatively robust, to intervene to protect business and jobs. Even if this means that the equity holders equity is taken over and held by a third party, eg Enterprise Irl, in order to protect the jobs and business.

2. Lack of equity. It is perfectly possible, and is often the case, that limited companies are set up and run large businesses, with all of €2 in share capital. Such a practice, which is widespread, is a commercial nonsense and a legal sham. Such companies then can manage to accumulate millions in liabilities, with somebody else, generally unsecured creditors taking the risks. The endlist lists of unsecured creditors, who struggle for sales to survive, are testimony to the sometimes corrupt ruthlessness of some so called business people, and to the willful indifference of the legislators and politicians.

3. Many SME companies are continuing to trade with mountains of debt and zero or negative assets. [There is provision in legislation to make directors liable in situations where they have been trading while insolvent, but like most company legislation in Ireland, it is a sick joke.] The proposal therefore to set up some of kind of credit register that, imho, has a very dubious legal basis is like a proposal from cloud cuckoo land, with zero relevance to jobs provision but every relevance to restriction of credit.

4. Following on from the above, there is no requirement on directors of a company to actually liquidate the company. They can simply walk away. No problem. Just file an annual set of accounts, call the company ‘dormant’ and Bobs your uncle.
If one is serious about the SME sector, and one should be, then it must include an obligation on directors to liquidate companies when debts, of any kind, extend over a certain period (say 180 days). In the UK and NI , there is of course a State liquidators office, that liquidates companies that have no funds for liquidation.

Much of the SME section is given to new methods of finance for companies.
Unless one addresses the legal deficiencies on the structure of limited liability companies, and unless one breaks the link of SMEs to the property sector, new methods and sources of finance will not be risked in a sufficient numbers of cases to make a real difference .

@ Tull
Which doom port would you recommend with a stilton from a properly run economy? Tawny or Tony ?


No edit function, doom porn. Best served with cold comfort, thin gruel and bitter tears.

Perhaps they serve biscuits with it at the food banks in London, Tull. It’s not all beer and skittles in the UK either, 2 quarters of growth notwithstanding.

@Tull & JF

Perhaps both contributors might remember JtO or John the Optimist who was at one time a very significant contributor to this playground back in the day. JtO had the uncanny knack of seeing the longer term upside in almost any piece of economic data – no matter how dire- as the sun was always waiting around the economic long run corner.

JtO either passed away in late 2010 or simply gave up believing and slipped away into the economic reality that is Ireland Inc – and by the way JtO was a big fan of the late Brian Lenihan (despite being from Tyrone if I remember correctly) as he used, it seemed, turn every corner and meet the bold Brian shake hands and agree that turning corners was yer only man. Indeed.

I’d suggest that every dog does have his day and one day the economic sun will shine on this green patch again but until we get very serious very quickly about debt write offs/ debt write downs that day will be needlessly delayed.The data presented here may or may not be within an asses roar of being right but in my opinion its highly unlikely that any recovery will be self sustaining when 500k+ souls are living in a debt tunnel with little or no prospect of ever seeing light again. No matter what your particular economic persuasion that economic and social cancer will curtail almost any chance of a broad based sustainable recovery.

It must be really annoying for your average Grauniad reader that Dave and George are making a better fist of running an economy than those beloved Europeans over the channel. It calls into question a two generations of veneration of the EU project,
Even DOCM seems to be losing the faith in the project. It has been a long time since we have heard a peep out of Jacques, Valery , Helmut etc.

The The Medium Term Economic Strategy for the seven years has turned into a cut and paste job with long on the usual habitual political aspirations of “growth and job creation” and short, exceedingly short, on detail.


Who should have paid? The bondholders the one’s who invested their money in the open market and assumed the “risk” are the ones who should have paid.

Minister Noonan reveals to us what a nasty piece of work Claud Trichet actually was. The state wanted to burn bondholders in Anglo but Trichet was having none of it. That necessitated a back down from the state’s announced intention that it was going to do just that. The line we were given from the night of the “foolish” guarantee was that Anglo was a “systemically important bank”. Although it was a bank with no branch network, no ATM’s, no retail customers and whose loan book was almost exclusively stuffed to the gills with developer loans.

We now know from Minister Noonan that Mr. Trichet told him that no senior bondholders would be allowed to be burnt or that ELA would be withdrawn. Which was quite a perverse threat seeing that the policy was subsequently reversed by the EC and ECB. Something to the effect that if we burned bondholders “we would trigger the bomb”. This then is what made Anglo “systemic” …. systemic in the time of the late Brian Lenihan and systemic in the time of Noonan also. As a bank it had absolutely no systemic importance to the Irish tax payer or indeed society at large. The reasons given to the Irish people, for issuing the promissory notes, were at best fictions and probably lies. The logic of converting the promissory notes to fully fledged government bonds was driven by the legacy capitulation first to Triche and then to his successor Draghi. Now according to Rehn this is all water under the bridge. Whose bridge?

Robert Browne:

The interesting thing about Trichet’s behaviour is not whether it was fair, just, or sound economic policy. The interesting question is, was it legal?

@ Joseph Ryan
“No attempt is made is made in the document to comment on let alone address a number critical issues that need to be addressed in the SME sector in the short to medium term.”

I had hoped for something that first presented an evidence-base (concerning the type of issues that MH summarises as SWOT) then went on to provide convincing arguments for a particular developmental strategy, with identification of key risks and associated mitigations. A basic growth plan in other words.

I trawled though the document briefly myself and found nothing of anywhere. That such a content-free, cheer-crazed and ignorant piece of work is being presented as ‘strategic’, a ‘plan’, and is being associated in any way with my country is deeply embarrassing.

Most of the work products of what some people here like to call ‘official Ireland’ seem to have no relevance whatsoever to simple businessmen like myself. My own tiny SME business I’m pleased to say is flooded with work once more and recruiting. But regretfully, my experience has shown that we can expect every possible assistance short of actual help from government agencies in making our growth stronger and more ambitious.

Taking Joseph’s points about the irrelevance of company law and the undiagnosed incompetence and risk throughout SME-land, and noting that in this ‘strategy’ there is no apparent insight whatsoever into the working of the real engine of Ireland’s economy (i.e. indigenous business), I think this piece of work is a disgrace.

@Colm McC

I’m still waiting for chapter and verse – minutes, transcriptions, notes, letters etc to be shown to me. If that is ever done then I will try to use my judgement, such as it is, to ascertain the extent to which there was Irish choice exercised, the extent to which Trichet or other persons forced Ireland to act in exactly what way, when, and how those influences altered over time from 2007 to 2013.

There has been so muich bullshit from the Irish side, and so much claptrap from the ECB/EU side over the years that I am not going to jump on any bandwagons on the basis of political briefing to journalists. I very much doubt I am alone.

Its time to put up.

@ colm mccarthy

TFEU places the responsibility for defining and implementing monetary policy of the single currency in the hands of the (ESCB) European System of Central Banks (Article 127 (2) TFEU) The basic tasks include;

“to promotion the smooth operation of payment systems”.

How does threatening a country with the withdrawal of ELA fulfil the mandate under Article 127 (2)TFEU? To my mind, the Trichet treat, ran shockingly counter to Article 127(2). It was ultra vires the article itself. Furthermore, as President of the Executive Board he had no legal mandate to issue such a threat even if, personally, for whatever reason, he wanted to. Subsequently, what has happened in Cyprus the “bail in” also showed that Trichet was not only wrong in law but wrong in strategy also. While we were threatened for threatening to bail in bondholders, Cyprus were threatened for doing the very opposite and not being severe enough on bondholders. Ireland has allowed different ‘rules’ to be applied to us, and also different ‘rules’ to be applied to Greece.

The supreme decision making body is not the Executive Board it is the Governing Council.

“The Governing Council shall formulate the monetary policy of the Union, including as appropriate, the decisions relating to intermediate monetary objectives, key interest rates and the supply of reserves in the ESCB, and shall establish the necessary guidelines for their implementation.”

The Executive Board shall comprise the President vice president and four other members all appointed by the European Council, acting by qualified majority.

Claude Trichet overstepped his own legal remit and as you say the matter should be tested at the European Court of Justice. What are the best European lawyers in Ireland saying?

I think there’s a reasonable chance that Trichet will be remembered in Kitchener style. It was easy to send the Ulster men over the top at the Somme (sell them some sacrifice memes) and it was easy to stare down FF (one for the team) but was subsequent action in the long term interests of the system ? Where was the vision thing ? He was a determined fighter against inflation but deflation may win the day in a pincer movement.
It’s interesting to observe where France is now compared to 2010.

The pity of it all

@ Tull

I wish I had your belief in the UK.
I have been listening to this on auto repeat but I can’t do it.

@ Tony Owens


The collapse of Intune Networks after receiving about €50m in private capital, in the same year Intrade, the most well-known Irish tech firm in the US, ceased trading, and a stripped down Elan, once the biggest indigenous knowledge economy firm, was sold off to a US firm, should give our faith-based policy makers a pause for thought- fat chance of course.


Don’t pin your hopes on a viable banking union in the light of Gemany’s position:

‘Economically, the important thing about this agreement is that it precludes any genuine fiscal transfer. All resolution will have to come from the banking sector……

‘The fundamental ideas behind a single resolution mechanism is to separate banking risks from country risks, to make the banking system as a whole more robust, and, to a lesser degree, encourage cross-border mergers, for example by encouraging foreign takeovers of a resolved bank, or parts thereof. We do not take issue with a long phased-in transition, but are wondering if the system that ultimately emerges from this process will fulfil these functions.

European officials often draw parallels to the FDIC, which is also funded by levies. The crucial difference is that the FDIC mostly deals with very small banks (unlike the SRB), that systemic issues are dealt with at the federal level (Tarp programme for example), and that the FDIC enjoys an implicit Federal guarantee if its funds were to run out.

The system that is currently being negotiated at EU level is the attempt to insure all risk of the banking system by the banking system. There is clearly a cross-border element in the steady-state system, in that fund shortfalls are to be covered by levies on the entire system – no longer on national lines. But we doubt that the banking system emergency funding scheme is credible without a fiscal backstop. With this banking union, member states give up a lot of sovereignty, but they do not really gain much in return’

h/t Eurointelligence

Even by your standards that is shoddy data mining. You could have referenced ICON over Élan – one of the leading CROs v a company that never discovered anything on its own a/c in its history. You ignored Paddy Power over Intrade. I suppose the next thing you will be claiming is that the near 1bn invested by AMGN & REGN in Ireland over the next few years is all spoof. You really need another song.


Sorry to disappoint you!

What you are overlooking is the institutional resilience of the EU. It is the lack of such a supranational system which caused disaster in Europe in the past. If the OECD was attempting these negotiations on the standard intergovernmental basis, with every country retaining a veto, it would have already occurred.

@ seafóid

This video is more pertinent with regard to the “bonnets rouges”. It is not the EU which insisted on the controversial ecotax giving rise to the unrest but France as a sovereign government. Brittany has a long history when it comes to dealing with Paris.

@ paul quigley

See my reply to TMD.

The EU, made up of 28 disparate countries, and even more languages and cultures, simply cannot be compared to the US. The solutions that it comes up with are sui generis. As Delors put it, it is a “federation of nation states”, a statement which is an apparent contradiction. It makes sense because the states are, for the most part, themselves the executive of the “federation”. (Go to “Brussels” in August; the buildings are empty.)

The intellectual underpinnings of what has now been agreed, or on the way to being agreed, with regard to banking union are to be found in this presentation.

Whether it will work or not remains to be seen. The author leaves upon the possibility in other contributions that a federal state in the classic sense may be necessary for a disparate monetary union to work.

Incidentally, it seems to me that the idea of all countries in the EU balancing their budgets by a certain date is a total nonsense and I suspect that the authors of that agreement know it.

I just read some comments suggesting that as forecasts are invariably wrong, they are therefore irrelevant and it doesn’t matter that that government’s base case growth forecast is overly optimistic. I find that line of reasoning quite bizarre. The danger surely is that if the economy does not turn out as rosy as forecast then the government will have misjudged its budgeting and the public finances could end up in quite an ugly place. Debt to GDP is above 120% already remember. Therefore I think this is exactly the sort of thing the FAC was set up to assess as Cormac Lucey suggested.

In saying that, while the headline GDP growth figures are likely optimistic, I wouldn’t be surprised if many of the underlying fiscal assumptions are actually quite conservative. That has certainly been the case over the past couple of years as GDP growth has tended to come in below forecast but the government finances keep exceeding their targets anyway.

Even the Danes stepped back from a bailin for all senior bondholders in its banks and the Dutch this year decided against it in respect of a collapsed bank.

As for Trichet, he was hardly operating solo.

@ Tull

Yes I know of the very successful ICON.

I was thinking in terms of the default route for most indigenous Irish tech firms and I have met the founders of QUMAS who have been lucky to sell recently for $50m. Focus need to be on more than one sector.

Yes, we do also have successful companies that use modern technology.

Anyway, enough of wasting time with an individual who acts the pig 😮

I would question the logic of welcoming a return to the expansion days of 2006 and prior.

Perhaps GDP will rise but we don’t have a productivity crisis, we have a debt crisis. Expanding GDP can only make things worse from a debt point of view, relatively speaking.

This is because money comes from bank loans. Hence every euro has an even higher debt.

Conversely money is deleted through loan repayments and this is why reducing the personal and business debts of the economy doesn’t leave it in a better position.

How electronic money is created and destroyed is shown in our paper here.

You simply can’t resolve the debt crisis under this system and certainly not in a sustainable way.

Reducing debt means deleting money along with it. Growing the economy means more money, but even more debt again.

However, there’s no reason why we couldn’t recognise electronic money as the primary and most liquid form of money, make it legal tender and have the central bank create it in a similar way to how it creates cash. The gain in electronic seigniorage would end our public finance woes and resolve the debt crisis in a sustainable way.

I dont understand how the Debt to gdp is supposed to come down to 93% by 2020.
Even allowing for growth of 3% GDP we are borrowing at over 3%
The cost of interest on the national debt this year was 6.2 billion I believe, which is about 200billion x 3% which is about right.
So even when we balance the books in 2018 according to the table above we should have increased the amount of debt considerably as a % of GDP

Is the lowering of the debt based solely on the long term debt repayment holidays? Are the interest payments dramatically lower starting from next year?
Are the holidays interest free or is there bulk payments due near the end?
If so shouldn’t they be accounted for properly?

Colm Mccarthy is right to say that Ireland has unfinished business with regard to part of that 200 billion plus interest but is this economic forecast based on this business has already being successful?


Thanks for the links, From the FT:

‘Officials said the borrowing system was not defined and still must be agreed during the transition period. Still, it could allow the fund to raise money on the private markets or from the ESM. Germany insisted that the loans are recouped through levies on industry, so that the backstop does not involve a fiscal transfer in the long term’

The necessary assets simply don’t exist within the EZ banks. Some of the giants are very thinly capitalised as it is, so its hard to see how we are not headed for a bust. Where is De Gaulle, as Dork used to say, now that we need him ?

@ Paul Quigley

An apt quotation from de Gaulle is the following;

“Toward the complicated Orient (Middle East), I flew with simple ideas.”

“Vers l’Orient compliqué, je volais avec des idées simples.”

Mémoires de Guerre: L’appel 1940-42

The outstanding exponent of this approach at the moment is Angela Merkel. A recent example is her speech to the Bundestag during which she repeated a number of basic concepts for the umpteenth time, including the need for treaty change. This puts the French on the back foot while feeding a bone to Cameron who wants less EU integration when the logic espoused by Merkel is that there should be more.

On the Banking Union, Schaeuble clearly wishes to shake hands on a deal with the Latins but to avoid having to count his fingers after he has done so. The Germans simply do not accept the logic of a fiscal transfer. The happen to have their own bank resolution fund but I read somewhere that it would take 130 years to fill it at the present rate of contribution.

There is, in my view, simply no alternative to national backstops until banks across Europe are gradually start lending to one another again. The fact that Berlin has accepted the concept of eventual mutualisation is, in itself, a major breakthrough.

If there is no alternative to national backstops then it is an open question as to whether there is a viable union. Simply put, if the Irish sovereign cannot stand behind its depositors then you will be at risk of bail in, then take your money out. Ergo Irish banks can’t fund themselves so it is all over. Rinse and repeat for I, P, E , G and it is all over. The Germans appear to want to keep the euro but appear unwilling to defend it. If the Italians shake hands with the Germans, it is perhaps they who should count their fingers.

I’m looking at the unemployment forecast and can’t help but think it’s a taaad optimistic even if the GDP growth forecast was 100% correct. After Finland had its depression in the early 90s it took 15 years to bring unemployment down 10 percentage points. That was with GDP growth better than in this forecast.

That’s one of the things that make me so angry about austerity, this hopelessly naive assumption that unemployment will come down soon enough once market confidence is regained. Yet even during the good years unemployment remained stubbornly high in much of the EU. Why should it be different this time, when Eurozone economies don’t even have their own currency they can devalue? No, the lesson should be to do everything you can to avoid unemployment spikes.

@ MH re Intune Networks.

This is bad news for all the stakeholders involved and a tragedy for those staff who had little warning of this. I hope they will quickly find homes in more durably-built telco sector companies.
Telco is a ‘difficult’ business to be in if you are small, as Intune were. The whole field is mature and commoditised with low margins. In those sort of markets the players that survive are the large ones with well-managed patent portfolio’s that enable them to forge cross-licencing arrangements with similarly well-endowed competitors that resemble an oligopoly. Small tech firms like Intune with very limited portfolio’s are not ‘players’ and are vulnerable to predation by the larger firms.
On top of this the arrival of well-funded Chinese equipment companies into this market has severely impacted profitability.

@ Paul Quigley et al

This blog post by Alex Barker of the FT lifts the veil on the various manoeuvres behind the agreement on Banking Union and the implications for the UK.

The relationship between the UK and the EU seems likely to go centre stage in the debate. It is unlikely, however, that political developments in the UK will be much influenced by opinion in Ireland.

Predictions that Ireland will leave the EZ are not likely to work out. The EZ will change dramatically under pressure from one or more of Italy, Spain or France. The coup de gras can take the form of Germany and one or two other countries leaving voluntarily or being ejected forcibly or the PIIGSF and a couple of others forming forming Le Nouveau Euro Zone or NEZ which will lead to jokes about nez perce (pierced nose) in times of weakness.

Ireland will not be a condition maker we will be condition takers. For a country noted for its risky behaviours from boozing to fighting to gambling we are unusually risk averse when it comes to politics, religion and the economy. That may not be a bad thing in the present perilous circumstances.

During the Pitchfork demonstration in Turin, Italy on Dec. 10th the riot police removed their helmets and marched with the protesters.

Italy is a country with a soul which might not allow the Italian Gov’t to ride roughshod over the peasants as happens in many other countries. One Swallow does not make a spring but it is something worth watching.

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