Categories Uncategorized A Finance Minister Fit for a Greek Tragedy? Post author By Philip Lane Post date May 20, 2015 70 Comments on A Finance Minister Fit for a Greek Tragedy? NYT profile here. Related ← Resolution of the Irish banking crisis: Hard-earned lessons for Europe’ → Irish Financial Regulation: Guidelines Rather Than Rules 70 replies on “A Finance Minister Fit for a Greek Tragedy?” Catharsis may be nigh! http://www.telegraph.co.uk/finance/economics/11617208/Greek-default-woes-hit-the-euro.html To be qualified as an unorthodox way to break the sovereign-banking doom loop? This extract is now receiving considerable media attention in Germany, and Greece. “All these reports that I was abused, that I was called names, that I was called a time-waster and all that: Let me say that I deny this with every fiber of my body.” (He says he taped the meeting but cannot release the tape because of confidentiality rules.)” The piece that should get the most attention is the damning indictment of the EU by Stiglitz…. …but of course he is a foolish academic with too high an IQ and doesn’t really understand the business of politics which is not grounded in reality but must adapted to the changing scapes of electoral whimsy….or what the Germans are saying now. Pending the outcome to the “negotiations” Varoufakis will either go down as a hero to greece and all of Europe or in 5 years time will be hailed as the Morgan Kelly of predicting the demise of Europe. LEIGH SALES: What do you think needs to happen to avert the disaster as you see it? YANIS VAROUFAKIS: Three things, the very simple steps that need to be taken. Look, in Europe, whether it’s Greece or Spain, what we have now is we have insolvent banks that are in a deadly embrace with insolvent states. So, the states get – borrow money from the centre of Europe in order to give to the banks and banks borrow to give to the state and both banks and states are sort of locked into a deadly embrace with another sinking very fast. So what we need to do is we need to break this nexus between insolvent banks and insolvent states. So, the way to do this is to unify the banking system, to Europeanise it in the European Union and have it being funded directly not through national governments. That’s a very simple step, but it’s a step it seems too far for the European Union. Secondly what you need is a mutualisation, a kind of common debt, like in Australia we have, you know, the Federal Government having its own debt over and above states. And thirdly we need an investment policy which runs throughout the eurozone. Because you have a secondly currency area, you need to have an investment strategy, a recycling mechanism for the whole thing. Unless we have these things, and Germany doesn’t want to have these things, I’m afraid there is absolutely nothing to avert the continuation of this slow motion derailment. http://www.nakedcapitalism.com/2012/06/yanis-varoufakis-greece-is-finished.html Reasonable analysis … in mid 2012 Of course, the German and French Banks had to be saved … from themselves … and by ourselves. Of course they did … this is the purpose of EU Democracy now … to save the financial system at all costs …. course it is. Nocence, Greece wasn’t exactly Stiglitz’s finest hour either: http://www.businessinsider.com/watch-hedge-funder-hugh-hendry-say-he-wants-the-euro-and-greece-to-tumble-fight-with-joe-stiglitz-2010-2#ixzz3anTowAr1 “Stiglitz says that betting on a default is absurd. Hendry is betting on exactly that happening in Greece. From Hendry’s opening line you can tell this is going to be a good fight: “Um hello? Can I tell you about the real world?” Then the BBC anchor asks (at 7:28): “So you want to see Greece tumble and the Euro currency tumble?” Hendry: “Absolutely.” He goes on to say that it’s recognizing the unsustainable debt and then Stiglitz cuts him off: “That’s absurd.” …” Steve Keen in fine form … … good pal of DanOB unsure about DinnyOB … due to redactions etc …. Greek Deception, Greek Tragedy, German Farce, German Myth It is more than two Millennia since Greece was the pinnacle of Western Civilisation. Today, it is berated as a backward, corrupt and unloved appendage to Europe—its appendix, so to speak. But Greece was once the brain and soul of Europe, and its legacy is still alive today. Rome was the far greater Empire, but it is Greece that is remembered for its philosophy, its politics, and its culture. Even Greek myths, from the truly mythical morality tales of Damocles and Tantalus, to the embellished history of the sacking of Troy, have more currency in today’s civilised consciousness than the gods or exploits of Rome. http://www.forbes.com/sites/stevekeen/2015/05/20/greek-deception-greek-tragedy-german-farce-german-myth/ h/t nakedcapitalism.com Worth the effort …. It may be that some economists, however eminent or notorious, may not have a good grasp of either the economics or the politics of the Greek crisis, A link to two, both Greek, who do! http://www.bloombergview.com/articles/2015-05-21/reform-not-stimulus-is-the-way-out-for-greece It is rather amazing that no thread has been opened on today’s QNHS report. The QNHS is the second most important set of stats (after the national accounts) relating to the Irish economy. On a blog whose title is ‘The Irish Economy’ the QNHS report is much more worthy of a thread than what the New York Times has to say about the Cretan. fyi UCC Science on the verge of Amen Corner! http://www.irishexaminer.com/ireland/ucc-emerge-as-leading-scientific-research-university-in-global-ranking-332122.html @JohnTheOptimist Fully agree. One must keep abreast of this serial overperformance … but in what? @ DOCM: “It may be that some economists, however eminent or notorious, may not have a good grasp of either the economics or the politics of the Greek crisis …” I presume this includes yourself. “Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery; they search across the seas. The wealth of other regions excites their greed; and if it is weak – their lust for power. Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape and slaughter the falsely call empire; and where they create a desolate wasteland, they call it peace.” [T. Agricola] @ DOCM “It may be that some economists, however eminent or notorious, may not have a good grasp of either the economics or the politics of the Greek crisis…” Well thankfully we have you to save us from them. Here a prediction for you – Greece ain’t gonna pay its debts, not all of it in any case, it simply can’t – blood from a stone and all that. The sooner Schauble and co recognise that the sooner this mess can reach a conclusion that allows for advancement for both Europe and Greece. @UFC the point Stiglitz makes as referred to in the piece is not in dispute however, he merely references historical facts and not making predictions – he simply pointed out that the EU had forecast a 4% drop in Greek GDP as a consequence of the austerity program….that it fell 25% is a damning indictment of the idiocy of the people that stood over that forecast…to get something most economists can get right wihtin a margin of error of 3 or 4 percentage points (which is a pretty wide margin), wrong by a magnitude of over 20 percentage points brings to mind parallels with darts and blind monkey’s etc… @ BWS I am as prone to error as the next person. The facts advanced should be the decisive consideration. http://www.project-syndicate.org/commentary/greece-export-problem-by-daniel-gros-2015-05 http://www.salon.com/2015/02/06/joseph_stiglitz_austerity_failed_greece_partner/ I am with Daniel Gros. If Varoufakis can make it through to July he will gain the chance to default on payments due to the ECB, rather than on those due to the IMF. Maybe that’s his plan. @DOCM, The Greek academics to whose views you link convey an understanding of some of the fundamental issues and problems, but, fortunately for them, they don’t have to go before Greek citizens to secure their consent to make the economic policy and structural changes required. The gap between what a majority of Greek citizens appears to desire – that Greece remain a member of the EZ – and what is required to secure this membership is simply far too wide. In Ireland the gap was tiny by comparison and the Government was able to reduce it in a very cautious and measured manner by targetting those who were marginalised and lacked collective organisation and influence, by hitting those who had no option but to concede that they’d been making out like bandits and some adjustment was inevitable, by bribing the most powerful and infuential special interest groups with ordinary citizens’ money to keep them on-side and by keeping all fingers crossed that the MNC enclave would continue to perform. Ironically, the only major slip-up was with the water charges where the Government was so intent on pandering to the semi-state and local authority special interest groups in Bord Gáis and in the local authorities water sections and the associated parasitic private sector special interest groups that it took its eye off the ball. @ PH No argument with you there! But you concede in your final paragraph that the rent-seeking interests in question were often not confined to narrow groups but to a wider representation of the workforce i.e. in this instance, the public service unions. Individual small rent-seeking concessions add up to very large sums if the numbers involved are high, as in the case of the water charges. And these are mainly the government’s revenue problem. The individual taxpayer does not know where his money is going. In this instance, the taxpayer found out. Were it not for the success of the country in attracting foreign – mainly US – investment, there would be many economic parallels between Ireland and Greece. The societal response to “austerity” has, however, been very different. I attribute this to an exceptionally strong belief in the main institutions of the state and a willingness to participate in defending them, with, as one would expect, a strong dissenting voice from those who feel let down by them (which varies from election to election). @ Nocense Greece’s creditors are well aware of the fact that the country cannot currently repay its debt. Their problem is that the debtor refuses to “engage” i.e. by reforming and improving productivity in their own interest and at least keeping open the option of paying off some of the debt and regaining market access. Interventions by economists, who combine dogmatism with near zero political nous, comforts the Greeks in the hope that they can continue to put the cart before the horse. The creditors also have taxpayers and they know that that equine combination does not work. In case you missed this embedded link in the article by the two Greek professors. http://www.project-syndicate.org/commentary/greece-export-problem-by-ricardo-hausmann-2015-03 It also has a whole series of interesting subsidiary links. @DOCM “Greece’s creditors are well aware of the fact that the country cannot currently repay its debt. Their problem is that the debtor refuses to “engage” i.e. by reforming and improving productivity” There is no acknowledgment whatever from the Eurogroup on this. They know it, but won’t let a word of it pass their lips….I ask you, who is being dogmatic? I will reserve casting my marks for their political nous pending how this all turns out… @ DOCM: “Their problem is that the debtor refuses to “engage” i.e. by reforming and improving productivity.” Reforming? Improving Productivity? Now whose terms would these be then? And, crucially, whose definitions? Yes, indeed. Greece set itself up as it pleased its politicians, electors and business and industry. So did the US, the UK, even the Potato Republic of Erin. So, whose ‘reform’ then? Now that would not be some international lender’s, would it? Yes, indeed. Modern money – if you can give it such a beneficial name is nothing more than fiat (electronic) stuff. No prior physical existence. No real collateral assets. But it instantaneously metamorphoses into reality when lent out – hence the need for exponential ecconomic growth by the borrower – if the truthful objective is to repay both capital and interest. Which is not. So, absent this essential physical growth – no can payee! And no amount of ‘reform’ or faux productivity can alter this mathematicall reality. So, as long as deluded folk continue to finess the math … crash, bang and wallop! That Gros piece is silly nonsense. Hausmann ditto. “They would say that, wouldn’t they!” @ Nocense From the Hausmann article; “But the truth is that the recession in Greece has little to do with an excessive debt burden. Until 2014, the country did not pay, in net terms, a single euro in interest: it borrowed enough from official sources at subsidized rates to pay 100% of its interest bill and then some. This situation supposedly changed a bit in 2014, the first year that the country made a small contribution to its interest bill, having run a primary surplus of barely 0.8% of GDP (or 0.5% of its debt of 170% of GDP).” If this is inaccurate, you might let me know. One could argue that the global financial system is now made up of electronic IOU’s. This does not, however, turn these into confetti money. Were the idea to be accepted, the system would collapse. Which is the reason why it is not accepted. A link which shows that it is not currently in the best of health. http://www.ft.com/intl/cms/s/0/a54d8124-f347-11e4-8141-00144feab7de.html?siteedition=intl#axzz3atDfFvcq @DOD Fully agree. One must keep abreast of this serial overperformance … but in what? In economic growth and employment growth. In both of these growth in Ireland has been twice the EU and UK averages since the mid 80s. That looks set to continue indefinitely. Seamus Coffey on the issue of primary surpluses, Irish style. http://economic-incentives.blogspot.ie/2014/11/is-ireland-running-primary-surplus.html Does it greatly matter who the Greek finance minister is or how he behaves ?. The Greek government was elected on 35% of the vote on a platform which is not in their gift to deliver. I doubt the outcome of the negotiations would have been different if Varoufakis had turned up in Frankfurt wearing Lederhosen and whistling Lily Marlene. Greece has too much debt but the short term problem is that the repayment schedule involves the IMF and the ECB, not EA governments or ESFS/ESM. Whether more money is forthcoming is a political decision, essentially up to Germany and France , just as the ‘rules’ on permissible deficits were relaxed in favour of the latter. We do not need Varoufakis or anyone else to point out that the single currency is deeply flawed as currently set up, but the market and some high profile commentators have underestimated the political will to sustain it. That may change of course and it would be foolish to argue it never will, just as it is foolish to put a timescale on any exit from the euro. “Does it greatly matter who the Greek finance minister is or how he behaves?” Not a whit! Greece looks awfully like someone who uses Payday Lenders on a regular basis – getting further and further into debt until they are no longer able to pay even the interest payments – not to mention any of the capital. This ‘game’ is being played out on an international scale and will continue as long as the borrowers can persuade the lenders to accept payment in fiat (electronic) money. Should be a while. There is a small problem with this – the need to purchase physical commodities, especially oil (or coal or gas). As long as all three of these essential economic goods are affordable, then the Money Musical Chairs will continue. @ DOCM: Dieting is possibly a good idea – but it does tend to alter ones mindset in ways that are not exactly ‘good’ in the long-term. As I have mentioned several times: its the math. You can delude yourself about your situation, but the math abides. Eventually, eventually … events. @ DMcL The answer to your question is that it does; for the reasons explained in this commentary by Anatole Kaletsky. http://www.project-syndicate.org/commentary/greece-germany-debt-forgiveness-by-anatole-kaletsky-2015-02 Events have not followed his entire prediction. They seldom do so for anybody. But the core problem is identified correctly as being of a political nature and ineptitude on he part of any persons involved raises the economic risks; and not just for the Greeks! It is likely that less public theatre would have resulted in lower damage to the economy and a similar outcome to the negotiations but the Greek government had to keep an eye on politics as well. Absent a plan B to be prepared to leave the euro, and no friends that would take its side against Germany, playing a game of chicken has been a gamble. The government will have to disappoint some of its supporters. @ JohnTheOptimist “That looks set to continue indefinitely.” Greece with very bad governments of left and right and superior infrastructure, has been outclassed by neighbours such as Romania and Turkey in attracting FDI. Meanwhile Irish governments have been very successful in making the country attractive for US FDI — we’re not yet on the radar of Chinese investors despite Europe including Portugal being their favourite location for overseas investments. Nothing continues “indefinitely” and looking at the longer term, Ireland remains a poor exporter despite recent good data. This is analysed here: http://www.finfacts.ie/irishfinancenews/article_1028843.shtml The stunning success of the same sex referendum is a good harbinger for the future when the current generation of senior politicians and policy makers move on. @ MH Without entering into the substance, which would be inappropriate, the only certain conclusion that can be be drawn with regard to the outcome of the referendum, IMHO, is that the younger generations feel, with near total justification, that they have been hung out to dry by the older ones. I doubt if there is a family in Ireland that has not seen this debated. How such dissatisfaction plays out in the coming years, remains to be seen. @Michael Hennigan. I never said the current growth would last forever. I said ‘indefinitely’, which means ‘as far ahead as the eye can see’. Looking at the indicators, the huge balance-of-payments surplus, the improvement in competitiveness, the resurgence in demand for housing as population growth accelerates, the dwindling budget deficit, the fall in the price of oil, the current value of the euro v sterling and the dollar, I can’t actually see anything on the horizon to stop or even reduce growth in Ireland. Obvioulsly, at some point something will happen to do just that. It will probably be some malevolent global event that no one foresaw even 5 minutes before it occurred. I have no idea when such an event will occur. It might be tonight or it might not be for 20 years. The two previous periods of high growth in Ireland (1958-1982 and 1986-2007) both lasted over 20 years. So, here’s hoping. You seem uncharacteristically positive about Ireland today. Likewise Fintan O’Toole in the Irish Times. I wonder how long it will before liberals return to their normal state of rage and fury about everything in Ireland and calling it a ‘dump’ or a ‘kip’. I give it 48 hours maximum. I wouldn’t call 62-38 ‘stunning’ given what one side had at its disposal. I don’t think it will have the slightest effect on economic growth. Presumably, you think the economies of Germany and Australia will now collapse, given that they are refusing to follow the ludicrous Enda Kenny’s example. I have no doubt, however, that, as is always the case in Ireland, history will be rewritten and falsified, so that future generations are taught that the current economic boom, which actually began in 2013, instead began in the last week of May 2015. While I don’t think it will affect overall growth in the slightest, it might affect how the growth is distributed. Given the prominent role the IDA played in the referendum campaign, I can’t see them pushing many projects in the direction of Monaghan, Leitrim and Roscommon in coming years. People who defy the instructions of the government, media and police in such a brazen manner obviously deserve to be punished, and I’m sure they will be. Anyway, Michael, off now to the relative sanity of Tyrone for our bank holiday Monday, well stocked up with cakes from Asher’s bakery. I strongly recommend them and will be happy to send you one for free if you wish. The NYT article reads like it was 90 percent written before the Minister was moved sideways in the negotiations. Tacked on at the end, @Michael Hennigan Character! http://www.irishexaminer.com/ireland/video-niall-toacuteibiacuten-cork-is-not-just-home-its-heaven-332448.html @Minister Varoufakis Blind Biddy says Hi! @DOCM If you are hoping for some sort of proletarian uprising, dream on. Overlooked yesterday was the Carlow-Kilkenny bye-election. That signalled a shift to the right. The most noteworthy features of it were: (a) the collapse of the Labour Party and (b) the rise of Renua. By my reckoning centre-right parties won 60 per cent, left-wing parties 35 per cent and independents 5 per cent. That is even including Labour, the Greens and SF as left-wing (pause for laughter). Labour bigwigs were too busy celebrating the referendum to notice that they are in terminal demise. They’ve a very good chance of making the Scottish Labour Party’s recent performance seem like a roaring success. It seems that Renua may welll be the coalition partner for FG or FF (probably FG). As the referendum showed, some 38 per cent of the electorate are more conservative than Lucinda Creighton, Mary McAleese and Daniel O’Donnell, which should give leftists pause for thought. @ MH On my earlier posts, some links (which may also interest JTO, and others) to justify the comparisons that I make with Greece. http://www.per.gov.ie/monitoring-and-managing-expenditure-now-and-into-the-future-measuring-the-accrued-public-service-pension-liability/ http://www.budget.gov.ie/Budgets/2015/Documents/Budget%202015%20-%20Full%20document.pdf Page C.39 of budget document. ” Public Sector Pensions The Department of Public Expenditure and Reform measures the accrued liability of the pension promise the State has made to its serving and former employees. The separate liability for State pensions is assessed as part of the actuarial reviews of the Social Insurance Fund which are carried out at 5 yearly intervals. Under European law from 2017, Ireland will be required to give an estimate of its total accrued pension liabilities, based on a standard series of assumptions, for publication in its national accounts.” Page C.56 “- Item 17a: Compensation of Employees, D.1, includes wages and salaries as well as an estimate of the amount that would have to be contributed if public sector pensions were actually funded schemes.” This was news to me. The obvious question is why are they not funded? And from the opening section of the first document. “The most recent [reform] was introduced by the current Government with the commencement of the new Single Public Service Pension Scheme, which radically changed the way in which pensions will be paid to public servants appointed from 1 January 2013. That will lead, in the medium to long term, to a large reduction in public service occupational pension costs.” I believe a minister remarked – I forget which – that the youngest people in his department were himself and his advisers. And this is the result of a process which is described as “reform”. @ JTO I am all for growth and the bigger and the faster the better. But not if it returns us to a situation where we have to create another disillusioned generation. Whatever government is in power in the coming years. it will have to face up to the contradictions and lack of fairness in what has been done to date. (Some recent coverage in the IT demonstrated the extent to which this has applied in universities). This will require facing up to the fundamental questions posed and not continued attempts to beat about the bush, a talent for doing so being the biggest talent of all concerned. (The Greeks are unwilling to admit there is even a bush as their continued insistence on maintaining a demonstrably unsustainable pension regime demonstrates). The above is not any failure on my part to recognise the income sacrifices that have been made by the entire public sector. That this was done with a considerable amount of good grace underlines the fact that the vast majority recognised that there was no choice. The way both government and part unions went about it was understandable. But neither optimal nor glorious. @ JTO Far from it! The thousands of young Irish people returning from abroad to vote in the referendum could be described in many ways, but a proletariat they certainly are not. As to your political analysis, I agree entirely cf. my post above which crossed with yours. @JtO I find that the QNHS has some cross currents (perhaps inevitable even with the best methodology) despite the overall strong picture. If one looks at the seasonally adjusted industry numbers (Table 3), key employment sectors like trade, food service and accommodation look soft e.g. little change in total employment over the last year and half. That’s not easy to square with a general sense that consumer confidence has returned, tourism helping etc. But anyway, a few positive milestones for sure in the findings. Embarrassing interview with Stiglitz here: http://www.irishtimes.com/business/economy/stiglitz-pours-cold-water-on-ireland-s-partly-delusionary-optimism-1.2222582 I wonder if any of his Irish fanbase will come out and condemn this nonsense about Catholic guilt? There’s a recovery underway all right, but it is clearly driven by a combination of exports and construction heading up from south of a sustainable level of activity, and it is clearly not consumer led. For an SOE that desperately needs to deleverage, that’s probably the best type of recovery. Hey up, there John. Go easy on that political red meat! – stick with your stats. A common enough mistake is to think in Left/Right political terms as if it were simply a horizontal continuum: Lefties on the left, Righties on the right, the Mindless in the middle. Not so anymore. There are actually two continua – one vertical, the other horizontal which intersect to form a four-quadrant matrix. The scale on the vertical axis represents the amount any government espouses to spend on ‘public services’ – education, health, payrolls, pensions, etc., etc. Increasing amounts are below the intersect; decreasing amounts above the intersect; that’s counter intuitive (see next para). A 45 deg, upward and to the right (positive slope) line through the intersect represents all points where public expenditures would equal taxation revenues. The horizontal axis represents the amount of all revenues collected from individuals and the business sectors. Increasing amounts to the left of intersect; decreasing amounts to the right. Again, not exactly intuitive scalings on either axis – but its an attempt to reconcile the situation where politicians are always less than truthful with the voters when it comes to taxes and spending. Note the public utterances of each of our political parties (is Renua = FG-lite or vice-versa?) on public expenditures and taxation – then locate each in one of the four quadrants, based on their espoused policies. Ditto for the non-party folk. Note anything of interest? Not a single political party (nor independent) will ever lie on the diagonal but will be happily clustered (with opponents) in the upper-Left quadrant (increased spending / reduced taxes)? Interesting that. And which is the “Austerity” quadrant? You know, the one which represents ‘reforms’ and ‘increased productivity’ – that is, reduced spending / reduced taxes? Why its the upper-Right! Now wer’e sucking diesel John! Cheers. @ DOCM: “I am all for growth and the bigger and the faster the better.” Aren’t we all. But its no longer physically (nor mathematically) possible. If one grows, someone else must shrink. That’s what has Greece (and the US, and the UK and the EU) where we are to-day. Everyone wants to grow. No one wants to shrink. @ JTO Who knows, perhaps you’ll be on here in a year talking about the surge in weddings and associated boost to GDP per capita on the back of the pink euro. Inadvertently attributing sound economic strategy to the left. @ JTO I have been reflecting on your comment on “38% of the electorate” being “conservative”. This might might more accurately read “38% of those that voted” against the background of the highest turnout in a referendum for some considerable time, only those on joining the EEC and on the subjects of abortion and divorce being on a par. But that is an incidental point. The real issue is what is meant by “conservative”. In this instance, I would say that it means attachment to property or, in other words, fears as to what amending the Constitution would mean in terms of the rights of same-sex couples to have children and the latter’s consequent inheritance rights. Whatever else is unclear, the fact of the involvement of a third person, either male or female, or their genetic material, is not. I have no problem with the outcome of the referendum. The very opposite, in fact. Had the vote been no, the situation in which the country finds itself would be even worse. Neither do I have any sympathy for any of the parties actively involved; on either side. My position, simply put, is that a constitution is an intricate primary document open to interpretation only by the Supreme Court and any subsequent change by way of referendum. I think that it was a monumental folly to rush into changing it before clarity had been achieved with regard to the issue of surrogacy. No other country would even have contemplated such a step. Popular consultations on issues of policy are one thing, on amending a country’s constitution another. I do not think that it will take very long for the full realisation of what has happened to sink in. This will have IMHO very considerable political consequences. @DOCM “But not if it returns us to a situation where we have to create another disillusioned generation.” That the young coming generation are disillusioned is a permanent feature of the human condition. When was it ever otherwise? But, they usually grow out of it by about 26. It is not difficult to convince a 20-year-old that his/her lot in life is considerably less than his/her talents and dedication deserve. Add in modern social media and modern state-welfarism and it requires little effort to convince a large section of young people that their every need can be met by state largesse, and that in so far as the state fails to satisfy their expectations in this regard, the only explanation is that the older generation running the state are crooks and imbeciles, and that utopia will arrive when they grow a bit older and replace the said crooks and imbeciles. Then, the circle continues ad infinitum. But, looked at objectively, the current generation of young people in Ireland have unbelievably cushy lives compared with my generation (born 1949). Job opportunities and what they pay are vastly greater today. Back then most jobs were menial, involved hard manual labour and paid a pittance. So are educational opportunities. When I was 18, about 5 per cent of that age-group went to university. Today its 60 per cent. Housing conditions are far superior. In the 1960s about half the houses in rural Ireland had no indoor toilet or bathroom. Opportunities for travel are a thousand times greater today. Health levels are far superior today. The mortality rate for age-group 20-25 today is about 80 per cent lower than when I was that age. So, every time I hear about the young generation being disillusioned with their lot in life, I switch off completely. In so far as the old generation have some wealth and security, its because they worked hard for it. @Brian Woods Snr Excellent stuff you write. If I was intelligent enough to understand a word of it, I would reply in detail. Alas, I’m not. @JF Embarrassing interview with Stiglitz here: The reputations of Stiglitz and Krugman will collapse if Ireland’s economic growth continues at its current rate (which is very likely). Ditto for UK growth. They both said austerity (i.e. living within your means) would lead Ireland to economic ruin and that it would kill all prospect of growth. They are being proved wrong daily. What else can they say other than ‘its all an illusion’? @That’s Legal. “perhaps you’ll be on here in a year talking about the surge in weddings and associated boost to GDP” That is possible. Just to clarify: in my above post I wasn’t referring to the rights or wrongs of the referendum itself, which isn’t relevant to this site. I was (a) rejecting Michael Hennigan’s suggestion that the result changed the economic outlook or that those who voted in favour were more capable of running a successful economy than those who voted against and (b) objecting to the imposition of an official state ideology (any ideology, but, in this case, liberalism), whereby the entire political class and the entire media spectrum are required to promote that ideology, where those who don’t promote it are demonised, where businesses that don’t support it are prosecuted in the courts (Asher’s) where organisations funded by the state (the IDA) are dragooned into supporting that ideology, where the security forces of the state (Gardai) abandon neutrality and become active supporters of the ideology, and where those regions that aren’t sufficiently enthusiastic in their support for the ideology are economically discriminated against. I am more familiar with this sort of scenario than most on this site, having witnessed at first-hand in N. Ireland in the 1950s and 1960 all of the things I just mentioned. @ JTO I am comparing the lot of the current younger generation, post Celtic Tiger bust, with the one that preceded it, prior to and during the period which you like to qualify as a golden age, and not with anything else. By any measure, they are enormously disadvantaged and for the reason that is totally at odds with the justification that you quote; “In so far as the old generation have some wealth and security, its because they worked hard for it”. This may be true of those employed in the private sector. For the rest, they are the beneficiaries of inflated boom-time salaries, and pension entitlements now being paid with borrowed money, with the current – younger – generation of taxpayers footing the interest bill. @ JTO At the risk of further raising your blood pressure cf. this OECD memo on Swedish pension reform. http://www.keepeek.com/Digital-Asset-Management/oecd/governance/the-swedish-pension-system-after-twenty-years_budget-13-5jxx3sx58x9t#page1 In a complex integrated modern economy, this is what “solidarity between the generations” really means. With the essential link to growth, or the lack if it, in the economy being the decisive weighting. @ JTO I’m only having a laugh. I was pointing that every relative cloud has a silver lining. In this case your lament at the states ‘ideology’ may prove to have a wedding industry upside that helps further support the Irish economy. Which in turn can only be a good thing for your hopes of seeing an erasing of the ‘artificial border’. With regard to your eye rolling at the struggles of the young. I would point out that though access to more education is easier, they still have to get educated (not cheap in fees or living costs), they also have far more competition from others, both locally, internationally and mechanically/softwarelly (made up word). Also not easy to land a job or keep one, considering the lack of job security and time required to constantly ‘up skill’. There isn’t an NMC or public sector job for every graduate. Also all the recent ‘reforms’ credited with helping our ‘competitiveness’ so much have really been targeted at the young. Whether it’s an increase in Uni fees, state sponsored 0 hour contracts, cuts in dole, entry level wages/pensions in the public sector, increase in pension age. Or wider trends like the decline of the cradle to the grave employment, lack of employer investment in education, low/no private pension cover. high rents, crazy child care costs. Or the fact that disproportionately it was the young that left to the rest of the Anglosphere to get employment. Allowing for a far lesser burden on the economy. My brother (San Fran) and sister (Doha) being two of the thousands. Of course this was all fair because they created the mess. Oh no wait, wasn’t that a different generation. That’s right, if memory serves me it was the same one that wouldn’t give so much as a bus pass to help out. @JTO ‘In so far as the old generation have some wealth and security, its because they worked hard for it.’ Also can you really stand over this. Property is the source of wealth for most older people. And from 1970 to today property in Ireland has probably increased at twice the rate of inflation. Meaning that most people that bought property around then got gifted most of their wealth, as opposed to working hard for it. Most of the gift came from women entering the work force and so doubling the credit available to buy property. Can’t see how that could happen again unless of course Polyamory households take off. The couple household is tapped out. @ JtO: “In so far as the old generation have some wealth and security, its because they worked hard for it.” Well, maybe. But we were carried along with a mighty strong current. And, I’m certain you do know what I am writing about. Its just may be that its a tad ‘inconvenient’, is all. I would have no worries if the prognostigations of ‘mainstream’ economists are proved-up incorrect. However, if someone shows that Albert Bartlett got it wrong – that would be indeed be a ‘gamechanger’. Meanwhile the Euro continues to plummet – threatening to breach the pyschological 70p barrier v sterling. How richly ironic that the Greeks woes and the global uncertainty associated with the same is what is delivering Ireland from its malaise. Now we know what it is like to feel like the German export juggernaut of the last 5 years when all around you is crumbling/struggling. What a wonderful little monetary union within which we reside where internal rentseeking in a zero sum game is the order of the day. My prediction above that the euphoria of the liberals at the referendum result would be short-lived has proved accurate. Fintan O’Toole is back to his normal whinging self today. http://www.irishtimes.com/opinion/fintan-o-toole-poverty-in-our-republic-of-equals-is-written-on-children-s-bodies-1.2225573 O’Toole simply doesn’t get it. What we’ve seen in Ireland and other countries in recent years, culminating in the referendum last Friday, isn’t a desire for greater economic equality. Its a desire for the removal of all restraints in the sexual sphere. The cry is ‘get the state out of out bedrooms’. OK, fine! But, its a short distance from that to “get the state out of our wallets’. Since the 1980s there has been a huge move all over the western world in the direction of social liberalism and the abandonment of all sexual restraint. Has this been accompanied by a similar move in the direction of economic equality? You bet your life it hasn’t. Relative poverty rates (or inequality as its sometimes called) are far higher now than in the 1980s. The gap between rich and poor has surged. There is a growing underclass in every western country. Ireland in the 1970s wasn’t a rich country by today’s standards, but it was a very equal country. Relative poverty rates were under 10%. The main reason is that back then the traditional family remained supreme in Ireland. That these two trends (increasing social liberalism and increasing economic inequality) should occur together is no coincidence. Social liberalism begets economic inequality. It does so primarily through the destruction of the traditional family and traditional marriage as a lifelong union. Liberals argue that the malevolent effects on poverty rates of the collapse of the traditional family can be compensated for by increased taxation and redistribution. It can up to a point. If 5%-10% of child-bearing marriages (or child-bearing partnerships, it matters little if there is a formal marriage ceremony) break down, redistribution to those affected by the tax and welfare system can handle it. But, when it reaches 50%-60%, as it is now in many western countries, the tax and welfare system goes bust. Throw in the second consequence of the social liberal revolution. All over the western world birth rates have collapsed. This is clearly linked to the destruction of traditional marriage as a lifelong union. Women are quite sensibly less willing to have children if they figure its unlikely the father of her children will be around for a long time. As a result of the collapse in the birth rate, all western countries are ageing at a phenomenal rate. By 2060 the proportion of the population aged 65 plus will be over 35% in most western countries, above 40% in some. How pray is the social welfare system expected to cope with that? If welfare budgets are currently being stretched, when the proportion of the population aged 65 plus is around 15%-20% in most countries, what’s it going to be like when that proportion doubles? We are clearly past the peak of state redistribution of incomes via the tax and welfare system. O’Toole can prattle on all he likes about eliminating economic inequalit. It isn’t going to happen. Its going to increase. State welfarism is past its peak and will not be able to handle the demands on it, resulting from the destruction of the traditional family and the ageing population. That both these outcomes are the result of the social liberalism O’Toole espouses is highly ironic. I should emphasise that my pessimism here relates to economic inequality and relative poverty only (what O’Toole is talking about in today’s IT). My views on Ireland’s economic growth rate are unchanged. @JTO “In so far as the old generation have some wealth and security, its because they worked hard for it.” I’m sure the sweat is rolling off the brows of the REIT investors below. http://www.irishtimes.com/business/commercial-property/rising-rents-boosts-reit-s-returns-1.2226392 “Irish Residential Properties Reit (Ires Reit) an Irish multi-unit residential property investment company, has reported a 17 per cent jump in average rents on its apartment portfolio, as it targets bank funding of up to €385m.” Welcome to landlord country. Love those tax tax breaks! @JTO I’m not sure you can link high divorce rates and low birth rates so neatly. Norway/France/Finland/UK/US have high enough divorce rates, where as Italys is quit low. Yet the former group all have a fertility rate of above 1.85 compared to the dying out Italians at 1.40. @ JTO The views of Merkel on the subject of social spending coincide with yours. I doubt, however, if she shares your analysis as to the main cause. http://www.ft.com/intl/cms/s/0/8cc0f584-45fa-11e2-b7ba-00144feabdc0.html#axzz3b8F20VLh A more straightforward explanation lies in the arguments advanced on this blog, by Paul Hunt in particular. In short, many in western society are not pulling their weight and a good many are pulling no weight at all, often through no fault of their own because of the chronically dysfunctional workings of their economies. France is the prime example. http://www.ft.com/intl/cms/s/0/4c30e6ca-0086-11e5-b91e-00144feabdc0.html#axzz3b8F20VLh If the dysfunctional elements are removed, people can both have their cake and eat it. One essential plank is the concept of individual responsibility e.g. that built into the Swedish pension system i.e. you have to work to build up your pension entitlement. In Ireland, we assume that some will never have either work or earned pension. As to the tsunami of piffle surround the debate on “equality” in the context of the recent referendum (to which FOT makes his continued contribution), a society that can deny equality of access to basic health care is a fraud when it comes to any such debate. Now Greece are down to business. http://www.bloomberg.com/news/articles/2015-05-25/greece-returns-to-talks-with-varoufakis-blaming-creditors “…In a sign of the country’s efforts to find ways to boost income, Varoufakis said the government is also preparing legislation proposing a 15 percent tax to legalize undeclared deposits held in Switzerland and other jurisdictions.” The the idea that wealthy people can remove their money from the jurisdiction, while the rest of society is left to carry the can, Paul Jones like after the music stops, needs to be challenged. His 15% is a bit low. Albert Reynolds, with Labour Party support, applied a 15% get out of jail all taxes paid tax. Greece in their straightened circumstances should have set the bar a good deal higher. The amount should be up to 50%, to match the benefit on devaluation, on returning to the Drachma. @That’s Legal I wasn’t trying to make light of the fact that your brother and sister emigrated. My point was to compare now with when I was young. Back then (a) emigration was chronic rather than cyclical – it was much higher and occurred every year (b) most emigrants took up unskilled jobs (c) there was lots of anti-Irish racism for emigrants in the UK (d) there was little opportunity for emigrants to return home on holiday frequently (even when they went to UK) (e) it was usually permanent and emigrants usually lived abroad until they died or retired. Nowadays (a) net emigration is cyclical, going from positive to negative in line with the economic cycle (b) those emigrating take up more high-skilled jobs (c) there is no anti-Irish racism (d) emigrants have much greater opportunity to retum home frequently on holidays (e) as the economic cycle shifts up, emigrants, if they so choose, can return to Ireland after a few years experience abroad. In the past 50 years there has been more immigration than emigration. Between 1995 and 2009 there was net immigration of about 400k. Since 2009 there has been net emigration of about 120k (although I predict this will be revised down after the next census in 2016). As the QNHS figures last week showed, Ireland is now returning to the upward part of the economic cycle. Unemployment and net emigration are both falling quite sharply. On present trends full employment (5%) should be reached by Q3 2017. Its already down to 9.8%. Net immigration should resume by 2016-17. Should they choose to do so, there is every possibility your brother and sister can find employment in Ireland within a couple of years. @DOCM My mistake. When you suggested generational conflict, I though you meant between my generation (aged 66) and 20-year-olds. It appears you meant conflict between 28-year-olds who entered the labour force in 2008 just before the recession and 24-year-olds who entered it in 2012 when unemployment peaked. @Joseph Ryan I am not in favour of rising house prices and rents. I merely describe from time to time why they are occurring, namely that population growth (exacerbated by rising divorce rates) is causing the demand for houses to run ahead of supply. There is an article by John Fitzgerald in today’s Irish Times that is making almost the exact same points that I’ve made several times here. http://www.irishtimes.com/business/economy/john-fitzgerald-the-bigger-the-population-the-greater-the-housing-need-1.2225388 Support for the view I expressed in my post above (about economic inequality) can be found in this excellent article in FinFacts (Michael Hennigan’s website) http://www.finfacts.ie/irishfinancenews/article_1028847.shtml In other words, as social liberalism advances, economic inequality increases. Even in the U. States, run by ultra-liberal Saint Obama since 2009, economic inequality is at an all-time high. I don’t see why Ireland should be different in coming decades, no matter what Fintan O’Toole says. @JTO You deliberately missrepresent the tone of the Finfacts article which clearly states “less inequality benefits all” People like you must absolutely hate the fact that the nordic countries exist. Those countries prove that your central assertion that “as social liberalism advances, economic inequality increases” is not necessarily the case. It is the case in lots of other places but the fact its not everywhere means it down to political choice. You are right that Neo liberals and Liberals are actually on the same side of the social equality paradigm. True Neo liberals are in favour of freedom of movement, social equality etc. However their reasons for thinking this way are simple. They want capitalists to be able to exploit everyone equally so they oppose racism homphobia, sexism and restrictions on movement of people and capital. Its how someone can work for Golman Sachs one minute then work to persuade wealthy countries to stop turning away refugees the next and not have to wrestle with their conscience. What the Nordic countries prove is that you don’t have to choose between conservative family values which inhibit freedoms or increased inequality. They increase liberal freedoms and try to preserve levels of equality. In the US Its the conservative Bible bashers that fight most fervently against economic equality measures. This shows your thesis that conservative family value and equality go hand in hand is rubbish. They are 2 separate things. The clever trick neo-liberals are getting away with all over Europe is that they are giving liberal parties like Labour in Ireland concessions on matters of the social social progressive agenda (which they already support) in exchange for abandoning economic equality and tearing down social welfare. Even if a country becomes more economically unequal it could decide to redistribute more. However the people who are benifiting from income inequality are also using their financial clout to influance policy and reduce their tax burden. What O’Toole is trying to do is harness the feel good factor generated from a social liberal victory and persuade them to fight for income equality. He is trying to say they are all part of one big effort when in fact they are not nessesarily related at all. I for one don’t blame him for trying but its fair of you to point out that they are not necessarily the same fight. @ JTO The most telling extract from the OECD report as quoted by Michael Hennigan is the following. “In fact, it is inequality affecting the bottom 40% which mainly brings down overall growth. As inequality rises, families with lower socio-economic background experience significant falls in educational attainment and skills, implying large amounts of wasted potential and lower social mobility.” It is not hard to find examples in Ireland. Education spending is biased in favour of the third level, apprenticeships on the German model are non-existent, spending on health is higher than the European average and we have 400,000 people on waiting lists! Where does one stop? This is not a left-right issue but one of interest groups taking more than their fair share of the pie. They are getting better and better at it. Until this reality is faced up to, there can be no real progress. “I can get you the medical card” has to cease to be the enticement to voters to go with one candidate rather than another. That it can even be uttered is an indictment of an entire society. Back to the subject of the thread. http://www.telegraph.co.uk/finance/economics/11629898/Varoufakis-demands-creditors-get-their-act-together-as-Greeks-cling-to-impossible-promises.html Juncker has publicly stated that Varoufakis is a “hindrance” to progress. Translating this comment into plain – i.e non-diplomatic – language would result in something not appropriate for delicate ears. The Greek finance minister might in principle approve of this but the credit channel won’t: http://www.zerohedge.com/news/2015-05-27/qe4-arrives-mystery-drone-rains-money-people-michigan-cash-grabbing-frenzy-ensues @all When Joe Brolly heard, from Blind Biddy, that 89% of so-called bail-out funds went directly to the Financial System …. and that the wealthy Greeks toss their moolah to Switzerland ….. and the lumpen Greek Citizenry had to pick up the tab ….. and … Joe Brolly: **&&^%%$££((( etc Blind Biddy: ))*&&&^%%%$££””” etc @JtO, DOCM Would you two like a room? Great value now in the Ordoliberal NAMA Suite at the Derivatives Death Star Hotel in Frankfurt … free WiFi incl. @DOCM “Juncker has publicly stated that Varoufakis is a “hindrance” to progress. Translating this comment into plain – i.e non-diplomatic – language would result in something not appropriate for delicate ears.” At least its not the “Anglo-Saxons” that are conspiring against him this time. I’ve spent a lot of years negotiating in various scenarios and when the other side specifically requests that any particular individual is sidelined from the discussions you absolutely never accede to that. The single from Juncker is clear – they are willing to offer up crumbs (a la Irelands promissory note deal) in exchange for capitulation minus this. Varoufakis clealry won’t accept this…he is therefore a “hinderance”….Rock on. @DOCM, “This is not a left-right issue but one of interest groups taking more than their fair share of the pie. They are getting better and better at it. Until this reality is faced up to, there can be no real progress.” I agree. Greece is an extreme example of collusion between quite broad-based special interest groups on the left and on the right to extract as much economic rent as was available. Unfortunately much of the rent being extracted up to 2008 was being fuelled by an expansionary bubble that was inflated both fraudulently and through the greed and stupidity of capital market participants. Not surprisingly, it is proving almost impossible politically to achieve an equitable and effective adjustment to the bursting of this bubble. Ireland exhibits a not so extreme example of collusion between rent-extracting special interest groups on the left and on the right – as they extracted rents during the expansion of the fiscal, property and banking bubbles. Despite these special interest groups often being quite broad-based, as in Greece, the openness of the economy and the heft of the MNC enclave have reduced their spheres of economic influence – even if the damaging impact of their rent-extraction spreads far behind these spheres of influence. The commitment of the vast majority of citizens to the institutions of the state and the broad, if sullen, acceptance of the process of governance ensured a steady, if tardy, adjustment to the impact of the bursting of the fiscal, property and banking bubbles. The steadiness and tardiness of the adjustment was determined by a governing imperative to minimise the impact of the adjustment on the most influential special interest groups. Nothing much has changed in relation to the disposition of political and economic power and influence. FG with Labour have shifted easily in to the much larger than usual political space from which FF was so forcefully and comprehensively ejected. The identity of those allegedly governing and their special advisers – and of those at the upper echelons of the expansive government apparatus as political patronage is dispensed – has changed, but little else has. There are always mutations and re-alignments of the various special interest groups, and these mutations and re-alignments have been more extensive since the triple blow-out in 2008, but their grip on the governance of the sheltered private, public and semi-state sectors remains intact. And so it goes on. One factor that contributes to keeping this sorry show on the road is that most Irish citizens have a poor grasp of what economic regulation is about and why, when properly applied, it is vitally necessary to protect their interests. But, with the exception of most US and Canadian citizens, they share this deficiency with citizens everywhere. @ Nocense In a scenario in which only two parties are negotiating, what you say might be true. Not in this instance! There is one – disunited – national government on one side and an equally disunited group of international bodies on the other, of which the Commission is the least important as it does not control any money. Both Tsipras and Varoufakis are playing with the financial destiny of their country, each equally badly. http://www.express.co.uk/news/world/581050/Greece-debt-crisis-deal-creditors-Greek-banks-withdrawl-outflow @ DOCM: “Both Tsipras and Varoufakis are playing with the financial destiny of their country, each equally badly.” Badly? So, what would ‘behaving goodly’ consist of? Being the Hellenic equivalent of Irish Croppies? How would you have rated Ahern and Cowan? Cowan and Lenihan? Are Kenny and Noonan the ‘A’ Team? Disastrously might be a better word. http://www.ft.com/intl/cms/s/0/c5f09636-07b6-11e5-9579-00144feabdc0.html#axzz3bipZlg00 http://www.primeminister.gov.gr/english/2015/05/31/prime-minister-alexis-tsipras-article-at-le-monde-newspaper-europe-at-crossroads/ In card games, the term would be to play one’s “va tout”. If Tsipras thinks that Hollande is going to be manouevred into putting France’s most important relationship – that with Germany – at risk in order to lend credibility to the thesis that he advances, he is on a planet even further removed from reality than that inhabited by his finance minister. It is a long weekend in Greece! That a government within the Euro Area might become insolvent while its banks are in a position to continue to operate, at least for a time, seems increasingly within the bounds of possibility. P.S. It seems not to have occurred to Tsipras, and whoever helped him draft the article, presumably including Varoufakis, that the bell may be tolling for Syriza. Or to give the correct attribution. http://www.famousliteraryworks.com/donne_for_whom_the_bell_tolls.htm A Speech of Hope for Greece Vanis Varoufakis http://www.project-syndicate.org/commentary/speech-of-hope-for-greece-by-yanis-varoufakis-2015-06 For the weekend that is in it, two links, the first dealing with the world as it should ideally be, by Joseph Stiglitz, and another from Alphaville dealing with it as it, unfortunately for some, is. http://www.theguardian.com/business/2015/jun/05/greeces-creditors-need-a-dose-of-reality-this-is-no-time-for-european-disunion http://ftalphaville.ft.com/2015/06/03/2130881/why-greece-might-still-choose-to-leave-the-euro/ Goldman Sachs (Huw Pill, chief economist) argues that the platform on which the current Greek government was elected – to retaining the Euro but with no further adjustment and/or external oversight – is “irreconcilable” with the demands of lenders. And without a deal, Greece’s remaining government cash reserves will soon be exhausted. “Facing this reality, a new political mandate and thus a new government, a referendum or new elections will be required in Greece. Not only is it possible that we may need to see sovereign technical default and/or blocked Greek bank deposits in order to come to an accommodation between Greece and its official creditors, it may be necessary to do so in order to break the current impasse in negotiations.” Courtesy the Guardian’s Athens correspondent, this gem of an exchange between the US and Germany. – Citing a senior German official, Greek television channel Mega TV described how US Treasury Secretary, Jack Lew had implored his German counterpart Wolfgang Schaeuble to “support Greece” — only to be told: “give €50bn yourself to save Greece. Mega’s Berlin-based correspondent told the station that: “Whereupon the US official said nothing because, as if always the case according to German officials when it comes to the issue of money, the Americans never say anything”. – Apart from Goldman-Sachs, Schaeuble seems one of the few capable of cutting through to the core of the political issues involved. The IMF’s hard line is, of course, grounded in the US approach to that organisation, and the limitations that exist for any US Administration with regard to committing funds. Syriza’s political problem now is not fundamentally with its hardliners but with the ex-Pasok supporters foolish enough to vote it into power. As Alphaville notes; “the net effect of this [a return to the drachma) would be to increase the well-being of the poor and the rich at the expense of the middle classes and those with significant savings in Greek banks who lack the sophistication to convert their deposits into hard currency.” A lot of them undoubtedly former Pasok supporters who will have a rude awakening if they continue to believe in the policy being pursued by Tsipras/Varoufakis. http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_05/06/2015_550737 It seems that they may have until March 2016 to come to a verdict; if Tsipras/Varoufakis are cornered into allowing them to. If not, time, as Merkel has put it, will run out. http://www.wsj.com/articles/greece-creditors-consider-extending-eurozone-bailout-until-march-1433788055 Greek / European crisis seems to be really coming to a head. http://www.telegraph.co.uk/finance/economics/11674609/Greek-talks-break-down-live.html @GK Indeed….accompanied by a dearth of exultations about how Tspiras and Varoufakis are learning about real politik….the German’s may just learn something about reality instead. @ GK Without Ireland in a leading role on this occasion. http://www.ft.com/intl/cms/s/0/ac17b378-141a-11e5-abda-00144feabdc0.html#axzz3dLZP2Lz4 Comments are closed.