Fiscal Assessment Report, Nov. 2014 Post author By Seamus Coffey Post date November 25, 2014 The latest IFAC report is here. Categories In Uncategorized 94 Comments on Fiscal Assessment Report, Nov. 2014 ← Mental Health and Unemployment → EC Assessments of Budgets 94 replies on “Fiscal Assessment Report, Nov. 2014” In my best Comical Mickey voice: “Shut Up! Shut Up! Shut Up! Shut Up! Shut Up! La! La! La! La! La! La! La! La! La! La! La! La! La! I’m not listening! I’m not listening! I’m not listening!” How does a fiscal council get away with calling for a tightening in fiscal policy without outlining any of the measures to attain that objective? Also it was clear from the interview on Newstalk this morning that IFAC lacks a clear, concise and accurate explanation of what contract manufacturing is. I haven’t time to read properly yet but this on page 34 jumped out: “On the Non-Voted side, there was an unprofiled €310 million transfer to the Local Government Fund, as well as an unprofiled capital transfer to Irish Water of €185 million.” Anyone care to unpick what this is? Credit where it’s due and the Fiscal Council is highlighting in its report the impact of tax avoidance activities. When the Q2 national accounts data was published I did say that there were some caveats and according to the FAC 43% of GDP growth in H1 2014 related to overseas manufacturing by companies like Dell – which books the output of its Polish plant in Ireland. The drugs companies are also booking overseas manufacturing in Ireland and it boosts net exports. There are two huge tax inversion deals – Medtronic and Actavis- in the works valued at $109bn and the GNP data will be further distorted. The Double Irish is set to remain until 2021. This is not to argue that there isn’t a recovery but it wouldn’t be difficult to produce adjusted indicators but ministers wouldn’t like it. 🙄 @ Gavin Kostick ‘Profile’ is the ancient term used by the Dept of Finance for target or planned. Have we arrived at a point where Ireland where bringing the debt ratios down is near impossible given the mess that is the EZ. Instead of writing such arid prose should a fiscal council start musing about the cost benefit of other policy choices such as default or IEXIT? This report is a ludicrous mixture of pseudoscience (like the car demand model outlined in painful detail in the report) and economic/statistical naivety. It is pretty obvious that any steady-state models will fail to work when after 7 years of contraction, the general public sentiment (and hence spending) switches from fear to normality. Not discussed at all is the economic cost of a fall in social cohesion (very likely large from a €2bn 2015 adjustment) or indeed the benefits of saying to the population that your fear levels can subside now, probably boosting economic growth through people’s choices to invest rather than postpone. Is Keynes dead? Any GNP/GDP growth forecast has an error rate of 2% or 3%, so there is likely a 50% error rate at a growth of 4%. Presenting forecasts to a decimal point given the dismally inaccurate forecasts of the past (and indeed some of the charts in the report showing forecast and outturn) indicates to me that the economic community have learned nothing or they live in an academic bubble which is impervious to reality. A very poor piece of work. @ Gavin, The €310 million is the transfer of the Local Property Tax receipts to the Local Government fund. Not sure why that would be deemed “unprofiled”. In Budget 2014 it was estimated that “Capital funding of Irish Water will be by way of direct Exchequer equity investment of €240 million.” Seems to me that they are €65 million below that. The abridged version of this report: “There is no longer economic term plan and the government intends to try and buy the next election with economically unsound promises.” The report puts a lot of emphasis on the budget constraints that will emerge over the next few years if Ireland is to meet the various Euro fiscal rules and highlights the difference between the unchanged Exchequer spending figures projected out to 2018 in the Budget and the bottom-up projections outlined in the Comprehensive Review of Expenditure, where spending is rising. IFAC doesn’t seem to expect any clarity on that dichotomy but hopes the politicians will do their duty;’To ensure public support, it will be essential for the Government to make a robust case for the national value of the newly strengthened budgetary framework’. That ‘robust case’ is unlikely ahead of an election. Perhaps all political parties should submit their economic plans to IFAC for comment ahead of the next General Election . The electorate is free to ignore IFAC’s analysis, of course, as it has to date. IFAC cannot be faulted for endeavouring to carry out its remit but its latest report, at first glance, will not be bed-time reading for the vast majority of the population. (The Taoiseach’s comments on the role of the Council could most charitably be described as having been made up on the run). The failure of the government to take the Council’s advice is not the issue but, rather, its failure to adopt binding future budgetary targets in legislation. (The report draws attention to this indirectly). This link – somewhat dated – sets out the Swedish approach to a much less daunting economic crash in the 90’s. It is the only one that can possibly work. http://www.businessinsider.com/how-smart-fiscal-rules-keep-swedens-budget-in-balance-2011-8?IR=T What we have is an Irish solution to an Irish problem i.e. no solution but the pretence of one. Meanwhile, the clash between Germany and France on the issue of balancing national budgets continues. http://www.lefigaro.fr/conjoncture/2014/11/24/20002-20141124ARTFIG00273-berlin-favorable-a-un-veto-sur-les-budgets-nationaux.php Unfortunately, the political will to stick to the EU rules must be found at a national level or not at all. Dan, Good suggestion that IFAC comment on manifestos. It may or may not be uppermost in folk’s minds, but incomes (state, corporate and personal) are the key – and possibly the only reliable indicator, of the health and wellbeing of an economy. The situation appears to be that the majoritarian incomes are being suppressed. And since it is accepted that at least 50% of GDP is accounted for by consumption – stagnant or decreasing incomes are real bad news indeed. “Is Keynes dead?” I believe so. All ‘great ideas’ whatsoever their focus, are themselves products of prior ideas: historical. The practical realities of real, evolving economies have not proven fruitful experimental laboratories for historically-based economic ideas. Some economic ideas, have unfortunately, proven to be quite deathly. And its a curious coincidence that its these latter which abide. A traditional Production/Consumption economy will survive as long as there is a steady advancement in the increase and distribution of waged-labour incomes: income and wealth disparities are moderate and contained. Our contemporary neo-Liberal Financialized economy can only survive as long as there is a steady suppression of the majority of waged-labour incomes: minority incomes and wealth disparities rise exponentially. The eventual outcome (after 4 decades of steady advancement in Financialization) is that of a secular, economic stagnation. We have arrived. Enjoy! Thanks Michael and Seamus. The new OECD chief economist presents a detailed analysis on the euro area’s woes – it could be a cure for insomnia but still interesting. http://video.oecd.org/?action=video&id=1390 Figure 2.3 Shows budget “major trading partner growth” of 2% flat from 2015 on. Which partners would those be ? The EZ will be well into deflation by then. The UK is hardly going to be busting a gut if real wages are falling and the EZ is mired in deflation. Is it all dependent on the US ? Berlin and Paris may be edging toward some agreement which would help Ireland’s economic prospects. http://www.thelocal.fr/20141125/franco-german-reform-freeze-wages-in-france It is the next disaster that matters. Irish Water has already occurred. On Monday Energy Minister Alex White announced that high-speed broadband will be provided at Exchequer expense to all of the 700,000 residential and commercial premises that the commercial companies will not service, by 2020 he hopes. The companies will reach 1,600,000 on a commercial basis. There is no cost estimate for the remaining 700,000. None whatsoever. But there is a commitment, welcomed by all parties and without a solitary dissenting voice in any of the media. Shure it’ll be grand. Process versus Content @ Colm McCarthy, It’s very interesting to listen to an exchange that happened on weekend radio, as part of This Week, RTE radio program on last Sunday. It contained I think, three very reasonable individuals, three very intelligent, educated and insightful individuals, talking about the setting up and funding of utility companies in Ireland. What was interesting about the exchange, brief as it was, on the This Week, program, was it shows the different perception that each individual politician had, of what it meant to establish a utility. It was interesting that the government representative in this case, saw it as his duty more than anything else, to stay on message, and give the radio interviewer the dummies, ten second guide to how European public procurement systems operate. On the other hand, a deputy from county Wicklow focused more on the basic first principles of business plans, and financial planning. He tried to explain, in the miserable amount of radio broadcast time slot available to him, . . . . something called a ‘cost base’, to the listeners. I am sure this idea of identifying the cost base, associated with a company, is a new idea to those of us who are not familiar with business, and operating businesses. But I am sure there are, listeners who did tune into that Sunday midday radio broadcast, who did understand the points made by the deputy from county Wicklow. I think that the conclusion that the same deputy came to, was that the new public utility company set up in Ireland, would be able to collect income over a period of decade, that would barely cover the cost of setting up the company, in order to collect that income from its customers. There is a weird kind of circular statement there, and it is subtle. I am sure, that it will take some people a while to grasp that point. But the question I would raise is simple. This has been the fashion of how we do many schemes in Ireland, down through the decades, . . . where the cost of either gathering or distributing monies, more or less equals to the amount of money either being gathered or distributed. I think this was the same point that the deputy from county Wicklow has made (although he agree in principle, from a cost reduction and efficiency point of view, of having one central utility company). But the question I have is, have we being operating schemes of various kinds, across a multitude of different industries in Ireland, over so many decades now, . . . that when it comes to setting up any new utility, any new service, . . . that is inevitably starts to take on the form of what the deputy from county Wicklow described in his criticism of the latest Irish state utility company? It appears as though, how we go about setting up something, and making it function, always seems to follow the same predictable pathway. It is like carrying a bucket from a well, that has a hole in it, so that by the time you reach the cattle trough, . . . there are only a few drops remaining in the bucket. Most of it gets lost in collection and/or distribution. BOH. @ CMcC By another measure, Irish Water can be considered a major success i.e. the principle that treated water must be charged for has finally been accepted; a conclusion that successive Irish governments – and notably FF – have been running away from for more than 30 years of EU environmental policy. Voting machines to the scrapyard OK but half a billion euros worth of – imported – brand new water meters! I don’t think so! The Commission is to publish its opinions on the various draft budgetary plans this coming Friday. http://ec.europa.eu/economy_finance/economic_governance/sgp/budgetary_plans/index_en.htm It is a case of all hands to the pumps. http://www.theguardian.com/world/2014/nov/24/european-union-to-launch-237bn-infrastructure-plan “The lack of” shows up 4 times, reserve null, surplus 9 times. Footnote bottom of page 3 : “The Budgetary rule states that the budgetary position of general government must be in balance or surplus or, if it is not, that it is on the adjustment path towards its medium-term objective. The debt rule states that debt in excess of the 60 per cent debt to GDP ratio must be reduced by at least 1/20th per year on average.” That is 5% per year off the top, not going to happen in my lifetime. Note the anxiety about the stability of the Euro that has erupted in Switzerland where the citizens have demanded a referendum (non binding by the way) on the question of holding 20% of reserves in gold. In France Marine Le Pen has written to the Governor of the Bank of France asking him to repatriate French gold and to top up to 20% of reserves at opportune times in the market. Is the prospect of Digital money causing widespread unease or is there something else at play. http://www.frontnational.com/2014/11/lettre-ouverte-de-marine-le-pen-au-gouverneur-de-la-banque-de-france%E2%80%8F/ Colm, When pressed on the issue of cost, the Minister said he was not going to show his hand until he was going to tender. Is that not a reasonable point? @ colm mccarthy 2020 visual acuity, vapourware or horse manure? It would be news if White had announced that he was in favour of reforms that would discommode his colleagues in the Bar Library. As you know well, announcements are the easy part and at this stage it’s likely too late in the election cycle to matter. Bruton has an audacious or delusional target: “in which Ireland in 2020 is the best country in the world for scientific research excellence and impact.” There is a country called Austria – no ‘world class’ university; one of the lowest jobless rates in Europe, not just in recent times but for decades and at 23%, the number of 25-34 year olds with a university degree is the lowest of the developed world and compares with 66% in South Korea and 49% in Ireland. South Korea possibly is a model of the future: a poor-rich country with a third of its workforce temporary. @ DOCM Domestic water charges were abolished in 1997. @ Mickey “Note the anxiety about the stability of the Euro that has erupted in Switzerland where the citizens have demanded a referendum (non binding by the way) on the question of holding 20% of reserves in gold.” The referendum appears to be incoherent. When they drew a line in the sand and fixed the CHF to the Euro at 1.20 the ‘natural ‘ exchange rate was 1.43. At the time they fixed the franc to the Euro Philipp Hildebrand, then head of the SNB, warned in the NZZ am Sonntag that • Switzerland would face recession and deflation without a fall in the value of the CHF against the Euro • The Swiss Banking system needed to be reformed • The Banking system had to be supported by the people in order to enjoy legitimacy • Rising unemployment would pose a threat to the property market • Exporters would be the most hit by the artificial level of the CHF in its main export markets The CHF never weakened. Deflation beckons. There is massive political ferment which has already been expressed in referenda to limit executive pay and immigration, both of which were lost by the elite including the main parties. Without immigration, growth would be pretty close to zero, as Hildebrand projected. He was hounded out of office by the SVP. The country’s problems can be ascribed to what Alfred North Whitehead called the “solemnity of the remorseless working of things” A lot of the criticism of the government (of which I am not a supporter) for its very modest reduction in taxes in the last budget is simply sour grapes. Today’s IT editorial is a case in point. Many people in Ireland and most of the media (certainly the IT) long for total economic collapse and at least another decade of austerity, in the hope that this will lead to some sort of revolution in Irish society (although they are divided on whether its a right-wing or a left-wing revolution that is required). We should not underestimate the pain and grief they are now experiencing, with Ireland growing faster than any other EU country and austerity having come to an end at least 5 years earlier than they had expected. The pain is doubled by the fact that austerity shows no sign of ending in the UK. Therefore, they plead with the government to continue the austerity regardless in the hope that this will bring electoral benefit to the likes of either Shane Ross (on the right) or Paul Murphy (on the left). Reading the IT, it is clear that in their madness many of their journalists actually believe that moment of revolution has now arrived. The facts are quite simple: (1) between 2009 and 2014 Ireland made far the largest reduction in its budget deficit in the EU (2) this was achieved both by tax increases (bad) and cuts in public expenditure (good) – Ireland cut public expenditure massively, while, for example, the UK increased public expenditure despite having a similar-size deficit (3) as a result, Ireland is forecast to have a budget deficit of 2.7% in 2015, while the UK is forecast to have a budget deficit of 6% in 2015 (4) even the most pessimistic forecasts show Ireland’s debt/GDP ratio falling sharply in coming years (the UK’s is forecast to rise) (5) with these improvements already in the bag and with growth forecasts for the next few years very good, modest giveaway budgets are now in order and easily affordable (6) the markets agree with this assessment, with the ISEQ yesterday breaching 5,000 (a post-recession high) and Ireland’d borrowing rates at an all-time low All else is just the usual claptrap we get from Ireland’s braindead commentariat. 1. I do think the fiscal council should suggest concrete measures of e.g. cuts in spending or increased taxes. As detailed as possible, in €100m/year tranches. 2. I think it is unreasonable of the fiscal council to ask the govt to include future spending increases / tax cuts into projected figures before any such are agreed or even very specifically proposed. Wouldn’t hold my breath waiting on the EU’s ‘€315bn investment plan’ . Governments are not prepared to increase debt levels so €21bn increase in EU spending morphs into €315bn via public private partnerships and EIB guarantees. On broader euro malaise, HSBC making interesting point that bond buying elsewhere has ended up with banks selling bonds and depositing proceeds back at the Central bank, so negative ECB deposit rate a big hindrance @ JTO “even the most pessimistic forecasts show Ireland’s debt/GDP ratio falling sharply in coming years (the UK’s is forecast to rise)” You won’t give us a forecast. I wonder why @ MH I know! My point, which I had hoped was clear from my comment, is that charges cannot be introduced and then abolished on this occasion. Were it not for the irreversible investment in meters, they probably would be. Incidentally, Irish Water is now running radio spots detailing the capped charges – the full ones – which will apply until 2018. No doubt the nicely named Department of Social Protection will shortly be detailing in parallel radio spots how to get the €100 “conservation” grant. The present national farce reminds me of another (in relation to radiation pills distributed to all households) and a comment made by Marian Finucane at the time in response to the unfortunate politician fingered on that occasion that what the people wanted was “for the government to mind them” (in the Irish colloquial sense of the verb). Why this sentiment is carried to such an extent in Ireland is IMHO directly attributable to our system of voting which just does not invite but demands clientilism and a mutually dependent reciprocal relationship between voters and the TDs they elect. AEP of the Telegraph. https://uk.finance.yahoo.com/news/jean-claude-junckers-315bn-deal-182104713.html @Otto, Tull IFAC has NO remit on the “HOW” …… On the Abstract Figs it is constrained by ‘extant’ odious debt figs and the Nonsensical Fiscal Compact (aka Angela’s Corset). A small few politocos, snr civil servants and interest groups set the agenda on the ‘HOW’ … within the EC, ECB, IMF, Financial System constraints. Deutschland needs to cop on http://www.theguardian.com/world/2014/oct/19/german-economy-miracle-about-to-fade “Forty per cent of all bridges and a fifth of the motorway network are said to be in a “critical state”, causing traffic jams and delays up and down the country. Worse still, a growing choir of economists and politicians warn that such cracks in the country’s infrastructure are only the beginning of a much bigger problem. Germany, Europe’s model austerian, they say, is saving itself to death.” http://www.ft.com/cms/s/0/326b0cec-5560-11e4-89e8-00144feab7de.html “Of the Luftwaffe’s 254 fighter planes, 150 cannot fly” @ MH Bizarrely, this news item just to hand. http://www.thejournal.ie/water-metres-northern-ireland-sinn-fein-1800554-Nov2014/ The evidence at this stage is overwhelming. It must be something in the water! The Commission intends to mark France’s budgetary copy book to the tune of €4 billion. http://www.lefigaro.fr/conjoncture/2014/11/25/20002-20141125ARTFIG00361-budget-2015-bruxelles-reclame-4-milliards-de-plus-a-paris.php In the case of Ireland, to add to a completely uncosted programme to bring broadband to the rural masses, we now have an equally uncosted one for social housing. Luckily, the economy, with no one evidently in control, apart from overseas investors – principally US – who know a good investment prospect when they see one, is steaming ahead. @ seafóid Those continually looking for the mote in Germany’s eye, I suggest, would be better served looking for that in their own; especially the UK and its hyperactive media! “we now have an equally uncosted one for social housing”. what’s your problem with Social housing, DOCM? the waiting list is massive. It might save BnB money over the long term. Yves here from NakedCapitalism: ‘I have to confess I had not taken the announcement of a €315 billion infrastructure spending program by the European Commission all that seriously, despite the fact that this on the surface represented a very serious departure from the Troika’s antipathy for anything resembling fiscal spending. It was so out of character that something had to be wrong with the picture, particularly given the absence of any evidence of Pauline conversions from the Germans. And that’s before you get to the fact that while €315 billion sounds impressive, given that the spending is likely to be spread out over time, the size of the shot, even if it worked as advertised, is less impressive than it might seem. In fact, the history of post-crisis interventions in the Eurozone has been that of sleight-of-hand over substance, except as far as austerity program are concerned. Ambrose Evans-Pritchard peels away the dissimulation in the latest effort at confidence building, with emphasis on the con.’ http://www.nakedcapitalism.com/2014/11/germany-european-commissions-e315-billion-infrastructure-new-deal-yet-smoke-mirrors.html Rural Ireland badly needs decent Broadband and a decent drainage of the Shannon. Of course, a third of a trillion is peanuts in EZ financial terms with 2 Trillion to the Banks! Most maddening is that a proper European Central Banke could sort this …. @ seafóid I have no problem with either rural broadband or social housing. Quite the contrary, in fact. My question is a simple one; where is the money to finance it? This should be evident from my contributions; to others, I would hope, if not to you. Where is the money to come from? Lets start with the odious financial system debt … HardBall required. As noted previously, I’d settle for 50 Billion if sorted reasonably quickly. Accepting for the mo the ‘allegedly’ sacrosanct nature of the 6th Glorious Mystery of the 12.5% ….. the corporate sector might pay somewhat more in Employee Social Insurance Contributions – presently lowest in EU. We could lease the Treaty Ports to the Russian Federation. Send an invoice for 20 Billion to Timmy Geithner. And collect! Invade Frankfurt. Many possibilities … re: Cost of Social Housing. The plan is build 35000 units at a cost of 3.8 billion. The annual borrowing cost of 3.8billion at 3% is about 114 million. Assuming an annual rental subsidy (to private landlords) saved of about 10,000 on each of the 35,000 gives a total saving of 350 million annually. This plan (or at least that much of it) makes excellent economic and social sense. [Where the reported 100,000 + housing units is coming from escapes me.] Social housing shortage? The country is awash in vacant houses. Dublin has a shortage of all kinds of housing. Time to spread the jobs to where there is a high vacancy rate. Dublin dominates Ireland in the same way that London dominates England and Paris dominates France. Time to spread prosperity to the whole country as was done in Germany under the Lander (federation) system. Dubliner’s are on the verge of chasing desirable properties which at the moment means red brick from around 1900 in Clontarf. Bringing up rising damp, hidden rot, upgrading wiring and plumbing does not dampen their enthusiasm. Ireland will not be able to compete internationally as long as housing is looked at as a cash box as it is in the UK, US and Australia. Most of us know that Irish governments have been and continue to be dysfunctional. There are many reasons for that the main reason is we have an electorate clamouring for personal advantage and politicians who accept “campaign contributions” to tilt the playing field to favour the highest contributors. The next election offers an opportunity to clean out the stables. This will only happen if people become actively involved by making campaign contributions and participating in nomination meetings. We need to find out if dysfunction is bred in the bone or something emanating from centuries of powerlessness and poverty that we can overcome in due course. Mad Oul Jozie down the road is taking a case on the ‘odious financial system debt’ to the ECJ. She will base her case on the Brehon Laws … and the concept of ‘eric’ or compensation for injustice. More power to her: A brief primer: ‘All this agrees with the whole tenor of Irish literature, whether legendary, legal, or historical, which shows the great respect the Irish entertained for justice pure and simple according to law, and their horror of unjust decisions. It was the same at the most ancient period as it was in the beginning of the seventeenth century, when Sir John Davies -an Englishman- the Irish attorney-general of James I., testified :- “For there is no nation of people under the sunne that doth love equall and indifferent [i.e. impartial] justice better then the Irish; or will rest better satisfied with the execution thereof, although it bee against themselves so as they may have the protection and benefit of the law, when uppon just cause they do desire it.” But later on the Penal Laws changed all that, and turned the Irish natural love of justice into hatred and distrust of law, which in many ways continues to manifest itself to this day.’ http://www.alia.ie/tirnanog/sochis/iv.html Re: Social Contract Mickey wrote, Social housing shortage? The country is awash in vacant houses. Everyone assumes that there is still a ‘country’ still in existence, and that that country is called Ireland. This is a myth. There is no country left any longer, that is called Ireland. It didn’t disappear in a burst of flames, or sink under the Atlantic ocean. It was eroded away over centuries upon centuries, and there even a question as to whether it even existed in the first place. I mean, has anyone got any idea, the kinds of numbers of people that parts of the ‘island’ of Ireland, outside of Dublin, have exported, . . . at a fairly continuous rate, . . . over centuries? Has any statistician, or economist, or socio-geo-political-architectural-urban economist, who has three Phd’s, . . . ever bothered to draw that diagram? Has anyone ever wondered why the population of the so-called cities in Ireland, excepting the capital city, has remained at such low levels, over so many centuries? There is only one central local authority area in Dublin city, that compares in terms of population density to a typical London city borough, of which greater London has around thirty, if memory serves me correct. Even if you put Limerick, Cork and Galway together, you still would not hardly create a single London city borough of all three. Some people who have studied spatial planning as academics in Ireland, have even questioned, the financial feasibility of even trying to develop both sides of the island of Ireland, . . . given the nature and scale of investment that is required to construct and maintain modern, functioning urban landscapes and environments in the 21st century. I forget what exact statistic exists now, but well over 50% of all of the population of Ireland, for the first time, does live inside Leinster. And this trend will increase very quickly in coming years, because the population outside of that province, is basically winding up shop, retiring and getting out of the game anyhow. You go through all of these beloved regional towns and such in Ireland, the picture postcard ones, that we all like to think about, but don’t want to live in, . . . they are dead places. It’s nice to know if you live in Dublin, work in Dublin, and raise your family in Dublin, . . . having come from one of these small places, . . that they are still there – but you definitely don’t want to live there. What is really lurking underneath this whole argument about excess housing supply, and rural broadband, . . . and just about everything else, . . . it’s only a roundabout way, of saying to one side of the island, that you’re not part of the plan going forward. And we need to have a frank and honest, open discussion, . . . if indeed, that might happen to be a sensible strategy. When, focus groups and such who aim to provide housing stock for disadvantaged and vulnerable in society, as a means towards re-integration of the most unfortunate, back into employment and advancement, . . . they are not going to be asking for new housing stock in those picture postcard, towns and places, . . . and probably not even in places like Cork, Limerick or Dublin any longer either. The whole idea in places, in Ireland, that aren’t Dublin, or greater Dublin, . . . is to export people as fast as possible. And that’s always pretty much been the case. Except that no economist, or no politician, or no academic has ever had the courage to draw such a picture. It’s all happening inside the borders of one province, and one province only going into the future. It’s just a matter of preference as to whether you want to call it Dublin, greater Dublin, Leinster or whatever. The United Kingdom develops and funds the most northern part of the island of Ireland (and even there, it is the north eastern portion). The Irish government develops and funds the eastern portion. And that’s just about it. Nothing else has any critical mass. The fact that banks did lend so much to investment in land and housing outside of the eastern region, was unfortunate, and unfortunate, because a lot of that investment was sadly mis-guided. That’s really the conversation, that we should have. This is where the ‘bad toxic property loans’, really stacked up, in the longer run. The whole thing really, of rural broadband, and bust banks, and de-population and rural de-population, is all the one thing. It is just different professors, in different faculties in universities, munching away on different aspect of the exact same problem – and not comparing enough notes – or drawing the kind of pictures we ought to be able to see. BOH. @ JR Borrow more money! Now, why did I not think of that? Probably because we as a country are formally committed to reducing the mountain of debt that has been accumulated since the start of the crisis. The implication is that if there is to be new expenditure in one area – however financed – it must be met by cuts in another against a background of an overall reduction in debt, whether by way of economic growth or further austerity being the burning political question. This is why legislative spending caps are a sine qua non for an orderly exit from budgetary crisis conditions. What we have instead is unrealistic announcements of actions – however laudable – because the budgetary context is ignored. Whether the electorate continues to buy such a pig in a poke remains to be seen. The media and commentariat in general seem to have done so. @ Brian O’Hanlon You hit the nail on the head. I visited the Aran Islands and other places on the Connemara coast early Nov.. Gaelic is in quick decline in its last outpost. The natives are using English words within sentences and using English in whole sentences. Gaelic will soon be confined to Primary and Secondary schools as a compulsory dead language much like Latin and Greek was up to the mid sixties. The train from Dublin to Cork now operates at a lower speed than 20 years ago due to misaligned track. The EU funded improvements but now we are on our way back to the ass and cart. You can book trips on Bus Eireann with 10 to 15 minutes between connections not one of which was kept. I am talking Tralee-Limerick-Galway-Clifden. The trains are on time we do not need Mussolini. After August in Germany I was spoilt. By the way all the talk about the poor state of German railways and roads was not evident to me. There is an orgy of railway improvements going on and the roads are like billiard tables. The roads in Ireland are also in relatively good shape. @ DOCM Tull’s suggestion of EZ 100 year bonds at 1% has much to commend it. The markets will throw money at debt and demand is on the floor. The EZ does not have the tools to works its way through a crisis so whatever keeps the wolf from the door… Re Social housing. The plan is not to build 35,000 units but to ‘build, acquire or lease’ so the final cost of that over 6 years is anyone’s guess. “IFAC has NO remit on the “HOW” ……” I think they could stretch their remit to a large menu of possible options for either tax increase or spending cuts, without proposing any particular mix. Rather this would be a menu which we could all debate and from which policy-makers could select various choices. Re: Development Mickey Hickey wrote, The roads in Ireland are also in relatively good shape. This thing about infrastructure, of various kinds holding back the parts of Ireland, outside of the greater Dublin area, has been trotted out for decades. There has always been some new thing, the remote parts of the island of Ireland require, and once they have that new thing, it will unleash spectacular levels of new growth and innovation, and prosperity. The truth of the matter is, the more remote parts of the island, have probably never been better served with a variety of technologies, infrastructure and services, . . . and one could improve all of that two or three fold again, . . . and it still wouldn’t make a blind bit of difference as regards to the trend, of outward migration away from the small picture postcard places in Ireland, towards the larger center of population that is greater Dublin nowadays. That is, there is something else, other than poor infrastructure, which is responsible for lack of development, lack of population and lack of economic sustainability, in many parts of Ireland, . . . that is, something other than, poor infrastructure. It is that particular alpha, or beta, or gamma, or whatever ‘Greek’ that you care to put on it, . . that is accountable, for the fact that most people from the picture postcard places in Ireland, leave those places generation after generation, . . . but still want to maintain an idea in their minds, that those places still exist, and still mean something, to someone. The idea of Ireland as a country, is a construct of the imagination more so, than being a fact on the ground. We don’t have a republic, but rather we have a republic, of Leinster. The regional towns and places in Ireland, the places often referred to as if they were major urban metropolis places, Cork, Limerick and Galway, have always been accused of being in the business of putting things in boxes, and shipping them out the door. This is no where more apparent actually, than in the area of people packaging, the business otherwise known as education. It begins with things such as first holy communion, advanced through high school diploma stages, and ends with higher level diplomas and certs. The regional parts of Ireland, do do this activity exceptionally well and very thoroughly. It’s the same system that operates with factory-like efficiency and turn-over rate, as any Japanese automobile plant. The different layers of certification and right-of-passage, as we see in this process, are exactly akin to those one would see, in the different layers of quality control, used in Lean manufacturing environment. But the tools still haven’t been invented by economists in Ireland, or in Europe, by which to measure accurately that beta, or gamma, factor, which I referred to above, that accounts for the lack-of-growth-ness, of parts of Ireland that are outside of the eastern industrialized corridor. Just to take an example, one may find a relatively small town in Cork or Tipperary, where measured in economic terms, a pharma plant nearby, drives the statistic of GDP through the roof. Meanwhile, back in the small town, you notice the 5,000 inhabitants has become half that. Or else, the age profile of that 5,000 has drastically increased. Or else, the statistic that says how many people out of every ten or dozen inhabitants of the said location, ever spend any significant part of their lives in that area, after school leaving age, . . . that statistic moves very close to zero. It is back to the problem of the blind man and the elephant. What you will find in Ireland, are researchers who happen to ‘bump in to’, one or other parts of the elephant, as part of the course of going about their work, . . . be it rural broadband, or water, or roads, or education, . . . or whatever else in happens to be. What we do lack however, are the tools, by which to combine those strands into something (like a figure for ‘GDP’, but different), which measures the extent of that gamma, I referred to, which dominates the whole picture outside of the province of Leinster region of Ireland. We have an awful lot of the data. What we don’t do is put it together. This is the kind of thing, that the fiscal council, could and should develop, . . . the tools, and measurement to do what I described. BOH. Otto,DOD The IFAC should be required to have a view on the how. Otherwise they are just hurlers on the ditch or bar stool volunteers. The good prof should be forced to say how he advocates getting to 2bn in cuts and taxes. It is pretty easy *400m from a 300 euro average water charge *900m from a 4% top rate of tax increase *350m net from a 3% cut in public sector pay *c. 500m net from a 3% cut in welfare payments There I did it. These guys haven’t a clue they need to read Krugman and Pickerty. Everything is upside down because borrowing costs are so low. The Anglo-Irish payment scheme was as close to printing cash as the EZ has ever come and is probably one of the explanations that Ireland is doing better that Italy at the moment. The ECB will start to mimic the Fed, the bank of England and Bank of Japan and start to buy up government bonds ,why because printing money – even if it is increasing “debt” levels has worked for the US and to a lesser extent the U.K. – The Japs messed it up by an austerity like VAT increase. We have to ask ourselves fundamentally what is debt – In this age when the large corporations are sitting on massive cash piles and the top 1% cash is growing and growing it becoming more and more like a regressive tax by the rentiers on the rest of society enabled by the western governments. This growing cash pile has led to a massive increase in stock levels as speculation grows and possibly sows the seed of the next crash. They are not investing their cash, a large portion of which they got from Government buy back of their long term bonds, in productive business but are using it for speculation and boosting their cash reserves in tax havens. Why aren’t they investing like after previous recessions – The reason is austerity has killed the goose and their is no market for new products or increased productivity as the cost of entry has increased and market size decreased. Why has the cost of entry increased – because of tax policies and the incumbents in a large market as the grocery trade, for example, are sitting on a huge cash pile and shifting profits between tax havens. No business model is going to come in and take on the incumbents however good. Of course you still have a bit of movement around tech companies inventing new markets and models such as how you call a taxi on a mobile phone but this is tinkering at the edges. Why has the market decreased, because of the anti-union, anti minimum wage pro privatization agenda of the neo-cons was taken up the EU, Japan and the US + anglo US enablers (Canada etc.) and all across the western world. The average western Joe-Bloggs has less cash and has little or no (Or at least a lot less) disposable wages than a decade ago. We brings us on to Ireland and the Fiscal assessment board. IF the government can get 1bn, 10bn, or 100bn from somewhere without increasing the cost of borrowing do it for gods sake – the critical thing is the interest rate, the rentiers tax. The U.K. is now in a productivity and wage decrease “growth” due to financial engineering (printing money) so we should the same. If a 1bn increase in borrowing leads to 1.5bn increase in GDP all things be as they are the debt/GDP ratio is going to down not up, do the maths. That is off course they use the money by giving Joe Bloggs a tax decrease, paying the guards and the nurses and growing GDP by the multiplier effect and not just give to some bank bond holder so it ends up boosting the number of digits on a computer, in a bank on the Cayman Islands. @Jules, Seafoid Simon Jenkins in fine form on the 21Billion x 15 (the luxemburgher multiplier! ‘We should cash-bomb the people – not the banks Juncker’s new fund will do little to head off Europe’s lost decade, as Friedman and Keynes would agree Abandon helicopters. Use bombers. Bomb Germany, France, Italy, Greece, the entire eurozone. Bomb them with banknotes, cash, anything to boost demand. The money must go straight to households, not to banks. Banks have had their day and miserably failed to spend. From now on they get nothing. Five years after the financial crash it is nearly unbelievable that the eurozone’s lords and masters now confront renewed recession. They seem inert before deflation, subflation, lowflation or whatever lets them avoid the word “scandal”. An ever more dominant Germany is unmoved. Its finance minister, Wolfgang Schauble, is set on “black zero” or a balanced German budget. The European Central Bank (ECB) murmurs about “quantitative easing” but is up against Germany’s furious protests. Ten per cent of the eurozone’s workforce is unemployed and one in five of its young. Greece has lost a quarter of its national product. The waste of resources is staggering. At the heart of this tragedy stands the absurd figure of the new EU president, Jean-Claude Juncker, impresario of Luxembourg’s outrageous tax-evasion oasis. Yesterday he proposed a €21bn European fund which, he claimed implausibly, would entice private backers to invest “up to” 15 times the sum. Who will invest when there is no demand? The pope rightly called the EU “elderly and haggard”, mistrusted, insensitive and bureaucratic. http://www.theguardian.com/commentisfree/2014/nov/26/eu-cash-bomb-recession-juncker-new-fund @Otto, Tull Fact is – IFAC does not have a remit on the HOW. @DOCM @ Jules, This is similar to my view. Massive graduate expansion across the world, bigger labour markets, higher unemployment, weaker/no unions, the successful ‘do what you love’ above all else thought virsus, better technology etc ….. all mean a giant wage conversion between the west (down in real terms) and east (up in real terms). The money created to deal with the problem has instead been used to bid up asset prices. Yet another poke in the eye for the next generation. Expensive property/assets acting as a further tax on these stagnate incomes and pensions for the young. The tax system hitting labour still further, as taxes are required to help those with low/no wages. And for the real suckers, boom time debt is the kicker. Leaving enough at the end of the month to buy a litre of milk (in Aldi) or perhaps download an App to facilitate time spent (or life escaped) on ones iPhone. It’s a circle of doom. But sure if you have a couple of apartments in south Dublin and a state supported DB pension you’re laughing. @ otto Excellent suggestion! Unfortunately, addressed to the wrong party. https://www.irishtimes.com/news/politics/fine-gael-promised-political-reform-but-the-government-hasn-t-delivered-1.1987759 https://www.irishtimes.com/opinion/letters/economic-management-council-1.1996699 As I mentioned above, it remains to be seen whether the electorate will buy the usual bill of goods which seems to be the only one the Irish political class can offer. I doubt it. Instead, what we are likely to see is a mass of independent “emissaries”, or deputies, which has a certain logic. A fractious Dáil may even make a better job of managing the country’s affairs than the so-called main political parties have been capable of. Here’s a blast from 2010 http://www.ft.com/intl/cms/s/0/aea96aa6-82e2-11df-b7ad-00144feabdc0.html “The system is just not working,” agrees Simon Samuels, banks analyst at Barclays … “We’re approaching the third year of liquidity support and still the market cannot survive unaided” Just fancy that, 4 years later, same situation DOD, I know but it should. If it want to tell us what to do, it should have the manners to tell us how in broad outline. Otherwise they are a bunch of spoofers. Bit like DOCM who knows all the correct positions but has no friends. A very significant speech by Draghi. https://www.ecb.europa.eu/press/key/date/2014/html/sp141127_1.en.html The most welcome statement is that every country in the monetary union must be able to survive independently. @DOCM re: Social Housing “Borrow more money! Now, why did I not think of that? ……” You outline several reasons why you did not would not wish to think of borrowing, but allow me to propose a much basic reason why you might eschew borrowing. That reason is simple. You are in no danger whatever of being made homeless, and neither are the national or EZ policy makers or a large majority of the various populations. If they were, more borrowing would be on the agenda for all kinds of housing. Remember that when banks had to be saved, borrowing rules (Growth and Stability Pack) were promptly pushed under the table, and only put back on the table when investors had been saved. The reality is that Europe’s elite is prepared to sacrifice an entire generation to unemployment and dysfunctional employment, in order to save the better off (bond holders and depositors etc). It is not entirely different from 1914-1918, when the old elites of that time were quite prepared to sacrifice (literally in that case) the younger generation of that time on the orthodoxies of jingoism and empire. I am not buying into any system that places adherence to failed policies above the basic societal needs. We could of course rearrange our expenditures to provide housing for all, by cutting the largesse that the state affords to its servants. Another item that I would certainly cut and even eliminate, is the potential €11 billion to the ESM (about 1 billion already paid), not a cent of which will find it way back to Ireland anytime soon. The Europeans must be having a real laugh at the Irish as they receive that money every year. I think that’s a great idea: let’s survive independently. After all, our European overlord has decreed it! ‘… every country in the monetary union must be able to survive independently.’ So why bother with a monetary union at all? It appears that you have failed basic Systems Theory 101 once again … not to worry; you have a habit of repeating yourself so repeats should not be a problem … Tutorial; system probs at a higher level cannot be solved by crucifying at lower levels. @ Tull John McHale is a fairly sharp cookie for an economist who has survived the ideological US academic system – he would have no problem coming up with some plausible suggestions …. [let’s park any suggestions from the x-imf chappie on the ifac for the mo] … were he to do so he would be instantly sacked by the Politicos. This is the design and the reality. The Big corporates and the IFSC set the local agenda; Angela’s Corset sets the rest. The lumpen citizenry scrapes the crumbs .. .. btw the local chappie who knows it all does have one friend; her, him, it self! @all Ballyhea says NO on Vincent Browne at 11 tonite. The opening paragraphs are worth quoting in full. “A common misconception about the European Union – and the euro area – is that they are economic unions without an underlying political union. This reflects a deep misunderstanding of what economic union means: it is by nature political. The Single Market is itself a political construct that could not operate without adequate political structures. A strong competition authority requires an executive to enforce competition policy, a legislative to write the law that it enforces, and a judiciary to resolve conflicts under the Law. The Commission, EU Council, European Parliament and European Court of Justice all play these roles.  Likewise, fiat money is a political construct, and monetary union could not operate without adequate political structures. In this case, an independent central bank has to ground its legitimacy in a precisely defined mandate that is embedded in a democratically agreed constitutional framework – which the ECB finds in the EU Treaties.  If our union has proved more resilient over the past years than many thought, it is only because those who doubted it misjudged this political dimension. They underestimated the political underpinnings of our union, the ties between its members, and the amount of political capital that has been invested in it.” It is to be hoped that this misjudgement continues. http://www.focus.de/politik/ausland/putins-rechtspopulisten-neun-millionen-kredit-fuer-die-front-national_id_4306426.html Yet it is clear that, for all its resilience, our union is still incomplete. This is the diagnosis that was made two years ago by the Presidents of the European Council, the European Commission, the Eurogroup and myself, in the so-called “Four Presidents Report”. And though progress has been achieved in some areas, it remains unfinished in others. So until we have completed EMU, which means achieving the minimum requirements in all areas for our union to be truly sustainable, doubts about its future will never entirely fade away. And this is true no matter how much political commitment is voiced. Oops! This insert at the wrong point. It should be at the end above. It is to be hoped that this misjudgement continues. http://www.focus.de/politik/ausland/putins-rechtspopulisten-neun-millionen-kredit-fuer-die-front-national_id_4306426.html @ DOCM I fear Draghi may have as much influence over the Germans as the Commission. He has been floating that balloon for a while but insanity still holds the upper hand. @all Brilliant list of posts on this particularly the historical references. All this about debt is just a mirage, all debt is ultimately owed by someone to someone whatever institutions get in the way to distribute, create, pay off or cancel debt. In this case the governments, doing the wishes of the western elite, are telling the world that we have to tax more to pay the “debtors” and not to take any risk building social housing and reducing the obvious housing bubble in Dublin (which curiously bought the last administration to its needs!) because it less “risky” to pay off a tiny portion of these trillions of debt in case there is another financial crisis caused by the very elites you are paying the cash to. Lets be clear about the choices here, we are saying put less money into education, making us less likely to secure multinational investment or generate homegrown tech companies in the future because it is “less risky” to change a couple of zeros to ones on the computer of bank in the Cayman Islands. Yes lets do it the elite rocks! There is something broken in the state of Denmark when Draghi can say “We will do what it takes” and his saying this means a mini-boom in Ireland and an extra million in employment across the EU. The soda-masocists have taken over and sometimes I wonder are we in another North Korea in an alternative universe. Let us analyze exactly what he said. What he said was “I could ask an underling to go upstairs to a computer and you know what I could ask that guy to do; type out an e-mail to bank or an individual purchasing their debt to government A of the EU and to pay that debt by putting a number X on the spreadsheet of debtors and then transferring some new Euros to them an keeping this on the global spreedsheet of debtors held here by the ECB” and critically “The Germans have said we cant do because of something that happened before WW2 and scared the shit out of them but I don’t give a damn, I’ll do what it takes!” An article in Journal of Economic Perspectives by Gabriel Zucman. Titled- Taxing Across Borders: Tracking Personal Wealth and Corporate Profits Ireland gets 23 mentions, Luxembourg 19. A well researched paper by all indications. gabriel-zucman.eu/files/Zucman2014JEP.pdf @ DoD, Tull re IFAC and no specifics- I think Ireland is at a point in the electoral cycle where discipline goes out the window . The state of play at EZ level means prudence is in order but for EK it’s more about goodies to secure another term. If you follow the Sindo things are fine-ish again and it’s very hard for the people at IFAC to bat against that. If they throw out a list it’ll be shot down . The 08 crisis was handled better than the one in the 30s and that killed the impetus for the deep structural reforms required to make the system safe – it’s all very fragile now as a result even if the markets thinks it’s the dog’s b’s. And getting that message across to Joe Public is not part of any plan. Seafoid, It is getting to “showtime” for Draghi. Either he implements QE including buying all kinds of instruments up to an including equities or he resigns and blames the Germans for destroying Europe 100 years after the first time that they destroyed the place. So, the house price resurgence is spreading to all parts of the country. http://www.cso.ie/en/releasesandpublications/er/rppi/residentialpropertypriceindexoctober2014/#.VHg0WTmIHVo Prices outside Dublin are now 12-13% above their early 2013 level. That’s a lot more than ‘bouncing along the bottom’ that DOCM claimed on a different thread a few weeks ago. Few things are certain, but one thing that looks fairly certain is that the rest of this decade is going to be a boom time for the building industry in Ireland. What happened to the 300k empty houses that were supposed to exist? Were we not told ad nauseum that the Celtic Tiger never existed and that the high growth 1986-2007 was simply the result of a corrupt alliance between FF and the CIF to build huge quantities of houses that were surplus to requirements? So, how come there’s now a housing shortage and soaring prices, increasingly nationwide? This can only get worse as population growth accelerates and new house construction lags behind. What’s needed is the appointment of a housing tsar to get construction of new houses going. I nominate Bertie Ahearn. But, I realise many would have ideological objections to the appointment of someone who actually gets things done, so its an unlikely appointment. @seafoid What I read into the Indo’s full frontal assault on SF is that the natural governing parties are running scared. This is the first time since 1922 that there is a prospect of regime change. First items on the agenda will be vote buying campaigns the likes of which we have never seen. Since they do not have the resources they had in the past, smoke and mirrors will be prominent. Another day older and deeper in debt will be the actual reality. @JTO “Prices outside Dublin are now 12-13% above their early 2013 level. That’s a lot more than ‘bouncing along the bottom’ that DOCM claimed on a different thread a few weeks ago.” Since when did house price rises that we are witnessing (42% in Dublin, per P Honohan) ever indicate a state of health in a stable economy or society. They are great for landlords and banks (in the short term) , but pretty much disastrous for everybody else, particularly those being made homeless as a result of the bragged about ‘recovery’. GDP growth means jacksh1t to somebody being turfed out of the house, or one rent rise away from having to move out. @ Tull I agree completely. Draghi is covering up the core problem- the tension between debtor and creditor countries. In their financial purity the Germans threaten to bring the house down. All of the adjustment will take place through austerity and price deflation in the periphery. Most of the adjustment has yet to come . It has been decided that debt burdens will be reduced by paying them off – not by inflation, default or debt writeoffs. And the EZ has no crisis mechanisms in place. “What happened to the 300k empty houses that were supposed to exist?” I would like to see Ronan Lyons address this question. tullmcadoo “There I did it.” Not a bad proposal! But it’s the sort of debate where IFAC evidence-led interventions might help a lot. Seafoid, look at the EU critique of our budget. We got to the target and now they want faster paydown. What is needed is for the EU member CBs to buy truck loads of their own debt, record a big surplus on the carry trade and remit that surplus back to the domestic govts so that it can be used for a range of tax cuts/spending/capex as local govts see fit. if the Germans object, there is the door. Gerexit & out of the EU. Go join ISIL!!! Re: House Price as an Indicator Joseph Ryan wrote, Since when did house price rises that we are witnessing (42% in Dublin, per P Honohan) ever indicate a state of health in a stable economy or society. What I scribbled about above Joseph, will give you some idea of how to look at this (accepting the fact, that you are probably a far better economist than I will ever be). What I described, is a mathematical kind of analysis that could in fact be used, to prevent us, from seeing only parts of the ‘elephant’ – the trunk, the ears, the tail, the legs, the tusks etc – and formulate a more useful measure, that will allow us to see the entire animal. There are lots and lots of researchers, experts, and busy people in general, rushing around the corridors of universities and centers of learning in Ireland, who are all very busy studying and describing parts. But we have no real measure of the thing, in its entirety. You can find RTE television for example, producing a report, about demise of rural pubs, and that impact on social fabric. You can find some other economist is worried about rural broadband, installation policies. And so on. In the absence of some good measure, which we rely on our economists and the Irish fiscal council, to be able to create, . . . we are stuck in that absence, with various ‘proxy’ tools, or instruments, . . . by which to gather it all together, into some image, or some representation of the whole. The criticism of the other commentator, who did reach for house prices, as an overall indicator is perhaps well founded. But bear in mind, that he has done so, in the absence of better measurement or indicator, that the country known as Ireland has purposefully decided it doesn’t want to create. Just take the house prices, indicator that you mention, . . . as crude, and all a factor as it may well be. The problem with the house price statistic as a measure by which we can see the elephant, as the sum of its various parts, . . . is of course, the problem, we see, where properties in parts of the country outside of Dublin trade at prices, below the cost of production. It is therefore, very difficult for a Dail deputy from Limerick say, to be present in a discussion, or on a talk show, and admit to the fact that there is a house price bubble forming. Because he constituents are looking at sales prices, below what they need to be. There is a basic problem therefore, in looking at the island of Ireland as a whole, from an administration point of view, economic or political points of view. What we refuse as a nation to do, is to accept the fact, that half of the island is in a de-commissioning phase of existence (half of the geographical entity otherwise referred to as Ireland, is literally being shut-down, and put on ice) While the other half of that geographical entity, is in full ‘start-up’ mode, . . . and as a consequence is experiencing all of the growing pains, poor planning and problems in general associated with new development. The housing price, on the island, is constantly be substituted as a crude measure of the health of the ‘economy’, . . . by politicians, policy makers and in media, . . . literally, because the guys with the mathematical brains, and bulging foreheads, . . . have decided not to provide us with a more intelligent measurement. And until that changes, I would be slow indeed, to criticize anyone, for substituting in the proxy measurement for economic sustainability and health, as described. House prices, are literally the only route planner, Sat-Nav and sign post, that we have, in order to steer policy decision making. That simple fact on the ground, has not altered as a result of our crisis. BOH. re empty houses. According to the 2011 census there were 168k vacant houses, 62k vacant flats and 59k holiday homes giving a total of 289k. If one excludes holiday homes the figure is 239k or 11.5%, down from 12.2% in 2006. On the same measure the vacancy rate in South Dublin was 5.4% and 7.6% in Dun Laoghaire/Rathdown. The former had only 2.4k vacant houses (as opposed to flats) and the latter 3.8k which implies virtually none now given demand and limited build over last 3 years. Re: Empty Homes Dan wrote, If one excludes holiday homes the figure is 239k . . . We don’t fully know the extent to which it is, or is not true, but I suspect that down through the years, many local authorities around the island, held a belief that having more housing units in an area, would somehow magically lead, . . . to a growing population, more development, more economic sustainability. The extent to which this belief was actively cultivated around the island, is not known (i.e. one local authority competing with another, to provide more housing units, as a means to compete for jobs, factories, employment and so on). But I think, that the conclusion that we can draw, from the statistics that you have provided, does indicate something, whereby housing policy, and housing stock provision, was the result of some commonly held perception or understanding, on the part of local authorities. A quarter of a million individual units is a shocking number of units, for a population of that on the island. If you convert that into number of citizens that that amount of housing stock could serve (if it happened to be in Dublin city, for example), you could be talking about half a million easily. That is, a city in itself, about half the size of the ‘greater’ Dublin metropolitan area. That’s shocking. Like I said before, if you put together Limerick, Cork and Galway, you wouldn’t even get close to the creation of a city of a half a million inhabitants. It brings me in mind of an observation once made about environmentalist Stewart Brand, about shanty towns and cities in the developing world. His point was that, all of that rural deprivation and extreme poverty, had always existed. The shanty town or slum city, in Africa, or Asia or south America did not create the poverty. All it did was to aggregate all of the poverty, and make it visible, . . . where previously, it had existed, except that it had been dispersed widely across a large area of rural landscape. What we have got in Ireland, is a similar phenomenon, whereby the deprivation, poverty, lack of opportunity and general inability to make end’s meet, . . . is quite widely dispersed across a ‘not so densely’ populated island (recall that in the early 1800’s, the island was much more densely populated than it is now), . . . and when you pull all of that poverty and deprivation together (which that quarter of a million vacant housing units is reprsentative of, . . . you begin to get some idea of the total size of the issue. This is what I am saying, we don’t actually capture, in our current analysis and our current thinking about economic policy on the island. We do seem to care, for some daft reason, what the selling price averaged across all of the occupied and un-occupied units is, but we don’t seem to ask the question, as to what a statistic of a quarter of a million vacant housing units, might mean. BOH. The Commission’s magnum opus on the economic state of the Union. http://ec.europa.eu/europe2020/pdf/2015/amr2015_en.pdf @ seafóid et al Draghi, who is in a good position to know, is telling it as it is not as many would wish it to be. From an Irish perspective, it is a case of accepting that it is a matter of Senior Hurling not Senior Infants. Someone should tell Vincent Brown! @ BOH According to JTO, all those empty houses are a figment of our collective imagination. I walk past many of them every day – in all their Celtic Tiger splendour, empty fountain included – and wonder where on the globe their owners might happen to be. The fact that they are not for sale gives me reason for hope. They – the owners – are waiting for better times – on the way – and an emigrant’s return. @BOH I don’t think one can compare the rural third world with the rural developed world. Transportation is a huge issue as is literacy, numeracy and a cash economy at the bottom levels of society. I have been to places on the Congo river where the crop is palm oil and there is no road access. I have been to other places where there is road access but poorly maintained and sometimes impassable. Political instability accompanied with banditry and lack of rule of law is quite common worldwide. I have been to places where major railway bridges were blown up (local insurrection) shutting down traffic for 6 weeks. Ireland is a well governed paradise by world standards, when we are compared to developed countries our penchant for the main chance and race to the bottom shortsightedness becomes exposed. Kerry Group which started out in the fifties in Tralee-Listowel as a Co-op formed by farmers to control their own destiny has morphed into a profitable and well managed multinational. I am sure there are many examples throughout rural Ireland of well managed exporting companies. I visited my wife’s cousins in Miltenberg, Lower Franconia a few years ago. They were particularly proud of local son Daniel Hechter who has worldwide operations but books all his income through the company Miltenberg HQ. The company pays Miltenberg, Lower Franconia and German taxes based on its world wide income. This is but one reason why Germany is a continuing success story. I could write a book on what is wrong in Ireland and another book on why nothing has been done to improve matters. I would start with halving the number of TDs’ and dividing the country into five regions each with its own elected gov’t responsible for Health, Education, Regional roads, policing, water/sewage. The national government would be confined to 30% of tax revenues and its responsibilities would be confined to National Defence, External Relations, one national research university, refereeing relations between regions and unemployment insurance as well as a national pension plan. The regional gov’ts would have a 70% slice of the tax pie and would be free to determine how much went to Municipalities and within broad ranges how much Municipalities could raise from property tax, fees, licencing and so on. The professions would be governed by the regional governments. There is also the issue of equealisation payments to regions from the national gov’t. The EU has developed the model so it is not a new crazy idea to help the less developed, we have benefited enormously from EU largesse. The County fixation has to go, it was a foreign imposition in the first place. Too many sacred oxes gored, pity. Bruegel Institute Labour Forced Mobility: Migration in Europe http://www.bruegel.org/nc/blog/detail/article/1489-labour-forced-mobility-migration-in-europe/ Is that hose from the UK sucking the life blood out of Ireland or offering succour to the unfortunate. http://www.irishtimes.com/opinion/why-government-can-t-deliver-on-voters-santa-list-1.2019071 “Can the political and interest group system not get its head around the need to manage our finances in a rational way without the troika being around to blame? Growth gives us some options, but we are not in a new era of plenty. There really is no such thing as a free lunch. ” versus http://www.rte.ie/player/ch/show/10349665/ Commission’s assessment of the draft budgetary plans (DFB’s) of 16 EZ countries. http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/dbp/communication_to_euro_area_member_states_2014_dbp_en.pdf Re: Localized Administration Mickey Hickey wrote, I could write a book on what is wrong in Ireland and another book on why nothing has been done to improve matters. I would start with halving the number of TDs’ and dividing the country into five regions each with its own elected gov’t responsible for Health, Education, Regional roads, policing, water/sewage. There are indeed, a lot of books, which remain to be researched, referenced and fully compiled by some author. There is one book however, which as remained thus far, conspicuously absent amongst the growing shelf of volumes now, which purport to tell a story, about the economic bubble and subsequent crisis that happened in Ireland. I am thinking in terms of the caliber of work, such as The Fall of the Celtic Tiger, by Donal O’ Donovan and Antoin E. Murphy published more recently, and which I am sure will provide future researchers with an invaluable source of inspiration. There is one story though, which has never been adequately told, and which is conspicuous in its absence from our collection. One can look back as far as the 2011 general election campaign in Ireland, and reflect upon the changes at a national political level that it represented. An analogy can be created, to suggest that the electorate were surgically removing a cancer that was deemed to have existed at one level in the system of administration. We can also reflect upon, this fact often mentioned by political science professionals in Ireland, that the local government level here, has almost no power. That is, this idea that cancer if it were to exist, would probably found somewhere at the national level, and ought to be dealt with, at the national level. What observers, who aren’t in industries such as property and construction, do fail to observe, I have noticed, . . . even though, local administration and local government in Ireland, may hold very little power, . . . it still does not remove the ability of the system, at the local levels, to create an immense amount of damage. This is what many of the expert authors, such as the one’s that I have referenced above, fail to see. One can see this failure of awareness also, in things like the recent fiscal council report. It is really the absence of policy making tools, measurements and instruments, at the local administration level in Ireland, which causes the most of the damage, in our society and in our economy. One of the most frequent sentences, of all that one can hear in any informed conversation or debate about Ireland, is this catch phrase, about shouting stop! Someone, or something, or some branch, or level in administration somewhere, . . . ought to have shouted stop. But no one ever identifies the local administration, local government levels in Irish society, as being a place, where the act of ‘stop-shouting’, could be performed most effectively. That book, or that investigation, . . . or indeed, that particular strand of an Oireachtas banking inquiry, . . . (the one, that could gather data, and first hand accounts from levels of local, as opposed to national, government), . . . does not appear to exist. It doesn’t exist in official state literature, nor does it exist in popular or non-political commentary and publication either. And I do find this most curious. We are supposed to have this wonderful democracy in Ireland, but, it doesn’t operate in such a fashion, that it allows the lower tiers, the local government levels in Ireland, . . . to provide some informed, hard data, to something like an Oireachtas inquiry, set up to look at failed investments, . . . that were all processed and administered, . . not at our national levels, or at European, European Central Bank levels, . . . but down, at the levels of councilors, and planners and urbanist’s at the bottom rungs. This is patently obvious to those who work in property and construction industries, but apparently not so obvious to those who seek to carry out inquiry. And every time, in Ireland, when you open the lid, to those lower levels of the administration, the monster jumps out. The last time that we really saw that monster, that has the ability to become a banking crisis, or an economic catastrophe in Ireland, was during one of the old tribunals in the 1990’s, of which I was too young to remember much about. But the same thing, has come around again in more recent times, and for some reason investigators don’t investigate underneath that rock. BOH. @ BOH It is not principally a problem of layers of governmental organisation except in one respect; the sclerotic impact of organised interest groups and the contribution that our voting system makes to keeping them in the saddle. Times, however, are a-changing cf. http://www.aei.org/publication/was-mancur-olson-wrong/ @BOH I have had some exposure to Engineers who have daily dealings with local government building approval and inspection staff. I was shocked to hear that never in many years have they had an onsite physical inspection. I presently live in a jurisdiction when a simple addition to a house gets 15 on site inspections which are specified in writing at the beginning. For example foundation excavation completed, foundation poured,………… More if any wrinkles show up. I asked them for their opinion as to why things are the way they are and was told the local gov’ts do not have the funds to staff a proper building approval and inspection office. Sometimes we people who have been years out of the country put the blame in the wrong place. When I heard of the small diameter, vacuum sewer systems which were touted as costing much less and being as effective as the large diameter gravity systems they, were described to me as being infinitely superior (cost) to County Council requirements. In fact they are failure prone and cannot take additional connections beyond limited capacity. Council staff approved these systems under pressure from . An exercise along the lines of we got the eejits into line. Most of the sub par buildings built during the boom were never visited by an inspector. One does not have to have too fertile an imagination to know the results lacked quality. A couple of years ago Condo management sued City of Toronto to recoup costs of fixing leaks in a curtain wall that was not installed properly. They won $1.5 million which was close to the cost of repairs. Nothing like this could happen in Ireland. Its the wild west on building sites, IFSC, Central Bank and many other places. Economic Conflicts are Expensive in Longer Term @ Above, I’ll try and make this my final comment. I hope it will serve to enhance and to expand your thinking somewhat. In Irish sunday newspapers, some articles appear, which seek to throw light on incoming information about the economy, and discussion about what indicators of performance, we can depend upon. I might try to communicate one idea, in response to the comments overhead, which I hope might assist some peoples’ understanding. There is a lot of real data, that we don’t gather, don’t pay any attention to, that is possessed by different regional managers, directors and decision makers around Ireland. Our columnists in sunday newspapers, always write in a scolding manner about the sins of over production, of something like housing, outside of Ireland’s capital city. Needless to say, if population remains static or decreases in many parts of the island, outside of Dublin, any housing production at all, can be categorized as over production. Economists everywhere, love talking about inflation. Economists talk about ‘breaking the back’ of inflation. Secretly, in the privacy of their homes, economists may also thank their lucky stars, for an opportunity to fight inflation, because the alternative too awful to even contemplate. In the very same way, in Ireland, economic writers, talk a lot about housing over-production, outside of Dublin. Because the alternative way to view things, is un-thinkable. It might sound dismal, to scold the Irish for over-production, but actually, it is an economist’s sly way, of being indirectly up-beat. The hard truth is, the statistic for housing vacancy may not represent over-production, but might be indicative of something else entirely. There are professional urban planning consultants, many of whom I have known over decades, who have spent large parts of their careers working on the schemes, . . . which commentators in Irish sunday newspapers, describe as over-production. It is considered okay, in Ireland, to take millions and millions of man/woman hours of tedious planning, policy making, development and implementation spread across a geographical area, and describe it neatly under the catch phrase. This is a story that an Oireachtas banking inquiry will probably never manage to illuminate, because so few of those who could offer us that real story, will even be present. For those of you, who are reading this from Canada, the best way to conceptualize, what happened in Ireland, is to employ an analogy. The one I would use, is the cold war. We don’t have open and honest discussion, about the two speed, nature of our economy on the island of Ireland (any political party here would view that as politically toxic). But in the absence of politics or democracy, something will fill that vacuum, just like in the cold war. Dublin has an economic engine, which is the envy of the rest of the island. It doesn’t mean that the remainder of the island of Ireland is without some economic weaponry, which it may choose to deploy. Into a very un-stable, situation, two groups staring at each other, from either side of an economic fence, banking institutions walk in, and do what banking institutions normally do – they identify an opportunity. The financial institutions, size up this situation, ascertain that both sides might urgently need to issue debt, to settle this score. And the Irish banks, were right. What we witnessed in Ireland, during the 2000’s, was an economic war, between both sides of the same island. What you are seeing now, around Ireland is akin to the bunkers of stuff, that they found in parts of the USSR, post 1989. That’s what you are looking at now. You won’t read about it in an Oireachtas banking inquiry I am sure. You won’t read about it, in columnist pages either. You won’t read about it anywhere, and almost no inquiry gets aimed, towards this rich and real source of data. Inside Ireland’s financial institutions, they did have a very clear picture of what was going on. The idea was to nudge, the island towards this form of economic competition and conflict. Which in itself, doesn’t have to be altogether harmful (Greenspan, cleaning up messes afterwards etc), but it can sometimes spiral out of all control. To build housing in Ireland, inside of the canals in Dublin, for families and schools for those families, . . . . every time you do that, there is some regional manager in the midlands, lining up the competition. The competition, is actually 300 new homes, fifty miles away, in a village that may have a hundred inhabitants, in a field, which used to be a Gaelic football pitch. Those who set policy for housing for Dublin city for example, have a hard job acknowledging that. From a banking, point of view, the salient fact, is that one is being allowed to fund both sides of an economic conflict. It is a conflict that plays heavily upon the prejudices and fears of both communities. It consumes vast amounts of labour resources, man-hours to manage this over a long period of a decade. You can’t do it, without leaving a long trail of breadcrumbs, if one were to choose to follow it. BOH. I see that the latest wheeze being peddled by the usual suspects is to claim that the Irish economy isn’t growing after all, but that the alleged growth is merely down to something called ‘contract manufacturing’. So, why is there such a large increase in the physical volume of goods passing through Dublin Port? http://dublinportblog.com/2014/10/dublin-port-throughput-q3-2014/ And why is this non-growth leading to such dramatic falls in the live register numbers and the government budget deficit, as we shall see further this week? In the UK growth is estimated at 3.1% in 2014. The government budget deficit is rising (to over 6% of GDP) and tax revenues are up just 1% so far in 2014. Yet, this growth is not questioned. In Ireland, despite lower inflation, tax revenues are up 9% so far in 2014 and the budget deficit is collapsing. Yet, the usual suspects are saying the growth does not exist. @JTO More vindication for your good self (although you’ll be too modest to mention it, I’m sure): From John Fitzgerald in today’s Irish Times: “After the housing bubble burst, there were bust developers and banks, a collapse in house and site values, empty homes and ghost estates. So building stopped dead and emerging housing needs were ignored. However, throughout the crisis, the population continued to rise, particularly those aged 30-40, in spite of emigration. At the same time, a depleted older generation – a legacy of heavy emigration in earlier times – meant few homes becoming vacant from deaths. The seeds of an emerging shortage were there. For the next decade the rising population will require about 25,000 new homes each year.” http://www.irishtimes.com/business/economy/housing-shortages-and-rising-rents-result-of-failure-to-plan-for-growing-population-1.2021713 Re: Housing super tanker John Fitzgerald wrote, . . . experience suggests that the house-building sector is a bit like a super-tanker . . The above does deserve some brief comment, coming as it does from the economic and social research institute in Ireland. Unfortunately, a lot of these economist experts, don’t understand quite what the nature of the super tanker, is, and what it would take, to do anything about it. I don’t know where I heard an expression about a war. It isn’t about how much pain that one side can inflict, it is about how much pain the other side can put up with. Two sides of the island of Ireland are locked in to one of these kinds of battles. The more economically dis-advantaged parts of the island of Ireland, can endure the damage of almost any number of ghost estates, vacant units, and the like. These parts of the island, view the exercise as essentially ‘putting up the fight’ against the major urban metropolis known as greater Dublin. It is just one of the techniques that parts of the island will use, to fight against becoming completely marginalized and redundant. The main impact though, of the presence of all of this un-used housing stock, lying at the edge of the greater Dublin commuter belt, is that it places very a real constraint on what kinds of residential stock, that is likely to be built in the Dublin area itself. There is one form of housing, that will always gain a ‘green light’ in business plans of real estate companies, inside of the Dublin area. It is a housing type, that our urban planning profession complains, that Dublin has an over-supply of. That is, the small, non-family friendly, high-density residential unit. What tends to happen, as a result of this economic stand-off that we tend to see between greater Dublin, and the outer commuter belt, is that one place receives supply of non-livable residential units on one side, while the other receives the supply, of under-used and un-used ghost places. If one is to be serious, about changing the course of Mr. Fitzgerald’s perceived housing construction super tanker, . . . you do have to employ some heavy-handed tactics to deal with this. It is not something that we can solve with a local based policy, or a planning policy, in either the Dublin side, or the non-Dublin commuter belt side. You essentially have to tie the hands, of managers and planners, in the outer commuter belt areas of Dublin city, for a period of time . . prevent the construction of additional ghost estates, . . in those areas. You also need to change the direction of that super tanker, that the expert economist writes about in the newspaper. Simply put, you have to exercise and implement policy, on both sides of an economic iron curtain. You have to alter the economic, social and planning directions of both, and not just one, side of the fence, . . as currently is the case. There are trade-off’s and can and do need to be brokered. More housing flows in one direction, and more industry and employment might flow in the other, supported by investment in public transportation, and various public utilities such as networks. I.e. Working together, rather than against. BOH. @ninap Very good article by John Fitzgerald. At the risk of destroying my reputation for modesty, it seems he agrees very much with the sentiments I’ve expressed many times on this site. Comments are closed.