Ireland in Recovery, Greece in Crisis

Adele Bergin of the ESRI and I made a presentation to a mini-symposium on Austerity: the Irish Experience at UCD last week.  Our analysis points out how wrongheaded it is to suggest, as some have done over the last few days, that if only the Greeks would take their medicine the way we did they might be able to expect an equivalent recovery.  This ignores the huge structural differences between the two economies.

Faced with evaporation of the tax base, jittery markets and a need for concessionary funding, our current government and the previous one did what was required on the fiscal side.  In the language of economics textbooks however, consolidation was necessary but not sufficient for the timing and pace of the recovery.

The first structural difference is the vastly greater openness of the Irish economy.  This cushions the domestic economy to an extent, since imports bear some of the brunt of consolidation.

Irish exports, though they took a hit in the early days of the international crisis, nevertheless propped up the economy in a way that the Greek export sector cannot do, because of the share of exports in the Irish economy, the sectoral pattern of our exports and our portfolio of export destinations.

The fact that Ireland was hugely specialised in goods and services for which international demand remained buoyant massively bolstered the economy.  Pharmaceuticals dominate Irish merchandise exports: pharma increased as a share of total US, UK and eurozone imports from 2000 to date (as shown by Stephen Byrne and Martin  O’Brien in the Central Bank of Ireland Quarterly Bulletin, 02, April 2015). Computer and information services dominate Irish services exports:  these increased as a share of  total US, UK and eurozone imports from 2000 to date.  Agriculture and food dominate indigenous exports:  these increased as a share of  total US, UK and eurozone imports from 2000 to date.

Services comprise an unusually high share of Irish exports.  Since transmission is almost costless, these are less geographically constrained and substantially less dependent on EU and North American markets than is the case for merchandise exports.  In the case of the latter, the MNCs can shift export destinations much more easily than indigenous enterprises can, as reflected in an increased US share as the US recovered earlier from the global crisis.  And Ireland of course benefitted much more than other eurozone economies from the weakening of the euro against the dollar and sterling over recent years.

Jobs in export production began to recover rapidly from 2009, driven by labour-intensive indigenous manufacturing exports and by the growth of both indigenous and foreign-affiliate services exports.  Ireland’s export-led recovery then fed into domestic demand.

It would be impossible for Greece to replicate this pattern.

And by way of footnote:  Even though it’s true that most Irish exports are produced by the foreign-owned multinational (MNC) sector, and that any €1 million of these exports creates less domestic value-added than €1 million of indigenous exports, a different perspective emerges when you look at backward linkages per job.  These are particularly impressive in the case of the rapidly growing MNC-services sector.

67 replies on “Ireland in Recovery, Greece in Crisis”

The Greeks could be said to have an MNC sector – shipping – and, unlike the Irish, they – admittedly, a small number – own it.

And the similarities do not stop there.

“A significant attraction for doing shipping business in Greece is the taxation regime. Greek flag vessels pay a fixed tonnage tax (depending on the tonnage of the ship) without the need to have dealings with local tax authorities regarding their annual income (law 27/1975). Once this tax is paid, no further (income) tax is paid for the profits arising out of the operation of a vessel or capital gains in case of sale of the ship, either by the shipowning company or its shareholders up to the level of individual (natural person) shareholders. This regime is constitutionally protected (art.107 of the Constitution) i.e. it cannot be altered even by act of the Parliament. Transactions relating to a vessel registered under art.13 such as registration, sale and purchase, mortgage, deletion etc. are free from any tax, charge or dues (save for a small fixed due). A similar (but not constitutionally protected) regime applies for foreign flag vessels managed by a law 89 Company. Furthermore, Greek flag vessels owned by Greek legal entities that make calls on U.S. Ports are also exempt from U.S. income tax pursuant to a bilateral treaty between Greece and the U.S.”

It is, of course, not tenable to compare the Irish and Greek economies directly. I am not aware of many doing so. But policy actions, while consolidating budgetary expenditure, that promote economic growth as opposed to those that stifle it can be compared, and are being compared by a wide public at this stage. Bumping up corporation tax for domestic firms under extreme business stress while maintaining – in the Greek constitution – a tax break on shipping does not fit into the first category.

Thanks for stating the blindingly obvious and one would have thought hardly needed to be said – but sadly it does and a lot loader.

Absent the Greek crisis, the euro would also appear to be greatly under valued – so while Greece descends into chaos, exporters across europe reap the benefits. The crisis is creating a positive externality for the exporting classes – anyone for a tax on the benefit accrued?….well German manufacturers what say you?

You are being obtuse Frank – the Greeks neglected to create an export sector before the Euro was invented. So it is their fault, they must be punished. and will simultaneously recover the ability to repay all debts. The Euro is a success QED.

Its been obvious Greek government debt was unsustainable and write downs were required for many years now – and I do mean obvious, not arguable or even likely.

Greece in the Euro was always going to be a disaster but it was non-PC to say so. Europe’s leaders and Greek governments are principally to blame for the mess.

The new Greek government has provided an opportunity for Europe to finally be able to shift their share of the blame on to the Greek side – for irresponsibly stopping playing ball. Now it’s simply their own fault.

Even if the Greeks now capitulate and do as they are told the last few months of chaos will still allow self-imposed economic turmoil to be blamed.

The new Greek government has disappointed neutral observers with lack of reforms and the Finance minister’s smart-Alec Cheshire Cat act has not been helpful, but the dumping of all the blame on the Greeks now received wisdom in the mainstream media is something to behold.


IMO…The Euro to USD / STG currencies have become unsynchronised.

The US and UK have utlisied QE years ago… and are now trying to raise interest rates… without hurting exchange rates too much.

This I suspect is the real reason why the FED are holding off raising rates as long as possible. They are attempting to wait out as long as they can so that the end date of Euro QE gets closer…. before they start to raise I.Rates.

Weak export performance is only part of the reason for Greece’s problems.

The other reason is that government expenditure in Greece has been far too high.

Eurostat gives the following figures for government expenditure as a %age of GDP:


Ireland 42.3%
EU28 49.0%
Greece 54.4%


Ireland 40.7%
EU28 48.6%
Greece 60.1%%


Ireland 39.0%
EU28 48.1%
Greece 49.3%

Some countries are temperamentally suited to paying the high taxes needed to fund very high levels of government expenditure. The Nordics are the prime example. No matter how high the government raises taxes in these countries, their citizens will sheeplike happily pay them. Other countries are temperamentally averse to paying a large proportion of their incomes to the government. In these countries citizens will go to great lengths to ensure that government doesn’t get its hands on their income. Why there should be these differences is worthy of a PhD thesis and therefore too complex a subject for a blog like this, but I’d say the role of government as oppressor over many centuries might have something to do with it. Among the latter group of countries are the U. States, Ireland, Greece and others. These differences in outlook and temperament should simply be accepted as a ‘given’ and not tried to be changed by left-wing social engineers. In countries whose citizens are averse to forking out half their incomes to the government, this should simply be accepted and public spending reined back accordingly. Greece doesn’t seem to have realised this until recently. If Greece had kept its government expenditure (as a %age of GDP) to Irish levels in recent years, it wouldn’t be in crisis now. However, the fall in government expenditure (as a %age of GDP) in Greece in 2014 is a major step in the right direction (although it no doubt contributed to the election of Syriza in January 2015).

@ JTO,

Coincidentally, re the PhD thesis, Irecently wrote the following few sentences in a book review:

The author comes across as favouring the Nordic systems’ high levels of social spending. A question unfortunately not addressed is why the Irish electorate has never shown itself to be of this view. Could it be that we would not trust our politicians to disburse such funds appropriately?

A corollary of the varieties of capitalism literature is that attempts to transpose elements of one variety of capitalism onto another can have unintended outcomes. Scandinavian social democracy emerged from a particular set of historical circumstances. State capacity was strong long before these societies democratised. In Sweden in particular the early state had developed a tax-raising capacity that was almost impossible to avoid, while the culture was such that neighbours policed each other’s behaviour quite intrusively. As political scientists Michelle D’Arcy and Marina Nistotskaya point out, democratisation then allowed this powerful state to be harnessed to achieve social goals.

When the state has only weak capacity on the other hand, people will not be willing to pay high taxes because they know that others can avoid them, while there is no mechanism in such a state to ensure that politicians will act responsibly with taxpayers’ monies. These authors use this perspective to pinpoint the differences between Sweden and Ireland, though Greece is a more extreme and topical example of a weak-capacity state.

Michelle D’Arcy and Marina Nistotskaya (2014) “Credible Enforcement before Credible Commitment: Exploring the Importance of Sequencing”, Working Paper Series 2013:4, the Quality of Government Institute, University of Gothenburg, Sweden.

@Frank Barry

Very interesting – would love to see your full set of slides!

The point of your presentation– ‘one size fits all’ policy prescriptions don’t work – is, as another poster notes, blindingly obvious. As pointed out by Dani Rodrik several years ago in relation to the IMF’s global adventures fixing broken economies, it’s essential to remain “skeptical of top-down, comprehensive, universal solutions, no matter how well intentioned they may be… the requisite economic analysis—hard as it is, in the absence of specific blueprints—has to be done case by case.” (Rodrik 2006 p.986).

But that’s all from a macro-economic perspective, about which I know very little. Except this: the science of economics is always trumped by politics.

First, major political institutions do not admit mistakes. So the ECB, EU or the IMF are not going to admit they made the wrong call on Greece in 2010, or however far back within the logic of infinite regression you have to delve to find the original ‘error’ of judgement. Further, if they believe that whatever the outcome of the current imbroglio they can maintain the system, and their position within it, then they can’t lose.

Second, in the present context, it takes more than one Lilliputian to tie down Gulliver (Keohane, 1969). Perhaps in the throes of their optimism and self-belief following an amazing election victory, the leaders of Syriza forgot that important detail. Their electoral campaign platform within Greece itself was always essentially populist. Populism invariably crumbles to dust when confronted with the more complex interrelationships, coalitions, and consensus formation at international level, as well as nationally, required of governing parties within ‘responsible’ governments.

So whether they liked or loathed their respective politics or ideological leaning, it was the support of the governments of other small states – and at least one big EU player [Spain? Italy? Anyone?] – that the new Greek government needed to bed down in their own corner six months ago. Instead, Syriza appears to have set about alienating everyone and anyone in government throughout the EU who might have been available as their assumed allies. What a wasted opportunity! It’s revealing that not one other small EU member-state stands with them now when, on the economic facts of it, they have a very plausible case to make on their own behalf.
As I understand it, the reason states have civil servants and expert advisors and ‘listening posts’ throughout the diplomatic sphere is to alert and advise incoming governments on the opportunities and constraints they are likely to confront in seeking to achieve the best deal for themselves on the international stage, particularly in the direst of circumstances.

The new Greek government appears to have fallen into a trap of thinking media exposure, and support within the echo-cambers of social media outlets, plus the voluble support of like-minded left wing (opposition) groups throughout the EU with similar electoral ambitions to their own, equates to full-blooded popular support. Or that it can be substituted for the hard-faced, and frequently unpleasant, work of competent international diplomacy.

All that said, personally I really hope there is a deal this weekend. And I couldn’t care less about some stupid horse–race media verdict of who blinked or didn’t, or who ‘won’ or ‘lost’, in sight of the final post. Europe doesn’t need the chaos of Greek state failure, now or in the future. More particularly, neither do 12m Greek citizens.

Just a few thoughts on a fast moving situation.

First of all best regards to any Greek readers of the blog.

I think the Ministers at the Eurogroup meeting this afternoon may be tempted to say there is no offer on the table so you can’t have a referendum on it so ‘yah, boo sucks’. It think this would be (another) small minded response and would be a bad way to go. Deep breaths and generosity of spirit is required.

I find Enda Kenny’s false memory of not raising taxes when they were is interesting. I think this shows an narrative so deeply embedded that it has become normative and this can’t be questioned. This is playing out on the Troika still insisting on “knowing best” which strategies will lead to growth and repair of finances when their track record is horrific.

In particular I think the IMF are in a particularly bad place and presumably are getting ready to explain when they have lost a load of cash. Up to now I was pleasantly surprised at the IMF’s capacity to learn but they seem to have got sucked in and forgotten all about Iceland.

Assuming that the Greek government defaults on the IMF on Tuesday the ECB is also in trouble as if it finally goes through and pulls the trigger it will be responsible for another step to a break in the euro but if it doesn’t it will lose purchase. Again, I think deep breaths and thought for the welfare of fellow Europeans would be good but I suspect a lot of central bankers will be scouring rule-books for ways to ratchet up the pressure.

Finally I’d be curious as to which way people would vote if you were (and indeed if you are) Greek on whether to accept the bail out terms. I admit to being torn as I generally agree with David O’Donnell and his case for a Habermas style European polity (if I’m not misrepresenting) but I don’t think that Europe is there any more and you may just be better out of it.

Greece could learn a lot from the Irish inward investment experience.

Two important export sectors for Greece, refined petroleum and shipping have low value added — Greece may have lots of potential drillable oil and gas but it’s not a significant producer today while shipping crews mainly come from outside Greece.

As for the Irish export performance, Frank’s data appears to be rosier than mine.

There was a recovery in the export sector after the 2009 dip but despite an inflation-adjusted rise of 72% in the value of exports in 2000-2013, direct jobs were lower than in 2000 in both the FDI and indigenous exporting sectors.

In 2014 the indigenous sector in jobs numbers overtook the 2000 level.

Despite a jump in exports over a decade, the jobs in the chemical sector hardly changed.

I estimated last year that 40 American companies accounted for two-thirds of Irish headline exports of €184bn in 2013.

Total jobs in exporting firms were 365,000 in 2014 and 356,000 in 2000 when the workforce was 20% smaller.

Since the end of 2012 to Q1 2015, of the 101,000 seasonally-adjusted jobs added in the Irish economy, there have been none in the Information and communications (ICT) sector, which includes big employers such as Apple, Google, and Microsoft, while Industry has added 9,000 jobs, but is down 38,000 from early 2008.

Total headline exports rose 13% in 2014 and while trade statistics showed a value of €89.0bn for merchandise exports, €11.8bn related to tax-related overseas “contract manufacturing” which was added in the national accounts.

Computer services exports mainly reflect tax avoidance and half of the staff in the ICT sector are in administration.

Indigenous exports in 2014 including inward tourism and transport, were valued about €25bn or over 12% of the total.

Jobs in the indigenous tradeable export sector in 2014 were at 185,000 compared with 180,000 in the FDI sector.

The Greeks are Europe’s worst exporters. Ireland’s performance is also poor with just 4,000 exporting firms compared with Denmark’s 30,000.

The over-reliance on the FDI sector with little innovation done in the economy (the Government says 54% of IDA Ireland client firms do not spend anything on R&D; 13% of foreign-owned firms – 107 firms – each spending over €2m, accounted for 88% of R&D spending in the foreign-owned sector in 2012) is reflected in Eurostat’s Actual Individual Consumption (AIC) per capita, a proxy for standard of living.

In 2014 the AIC for Ireland was at the level of Spain and Cyprus.

However, we are not Greece.

Neither are we Denmark or Austria — we tend to be average among advanced countries in international benchmarks for issues like competitiveness, education system, doing business, patenting etc. — and maybe that shouldn’t be sniffed at as absent globalisation, Ireland would have remained poor.

@ Veronica

Tsipras has met Putin twice since becoming PM but no Chinese leader while the future of China’s investment in the port of Piraeus is in doubt as the government says it will not go ahead with privatisation.

Chinese companies have invested €46bn in Europe in 2000-2014.

€5.3bn in Portugal; €405m in Greece and €99m in Ireland.

Within the euro, Greece needs foreign investment in its tourism sector as it competes with Turkey and it should not just rely on price.

It is good to see the Greek electorate being given a choice between membership of a single currency union of free democratic market economies or a return to some version of a Warsaw Pact country c 1960 without Soviet subsidies.
What will happen to the Euro in the aftermath of a Grexit? My suspicion it that will recover modestly once the tumour has been excised. Of course electorate in othe countries may vote to follow the same path of the Greeks. We shall see where this leads. Interesting times ahead

If Greece goes (and I would, given the prospect of endless recession within the euro), then the next game of international speculators is: Who’s Next? Maybe another small economy with way too much debt and an empty promise from its “European partners” to treat it as a special case?

@ GK

KW argues that there should be no connection between Greek membership of the EZ and whether it defaults on its institutional creditors – after all the banks are not directly affected by such a default. He argues that the threat of Grexpulsion was spuriously drummed up by the ECB at the behest of the Germans.

Coming closer to home, the logic of this argument is that Ireland could default on its institutional creditors (indeed on all its foreign creditors) as this would not in any way directly affect our banking system and thus the ECB should have no technical problem in continuing to support it within the EZ.

According to the FT’s ‘How the euro was saved’ , published in May 2014, the then Greek Prime Minister, Papandreou, wanted to hold a referendum in late 2011 on the proposed 2nd Greek bailout. This was met with hostility by Euro leaders and they insisted that if he did have one it would have to be on continued euro membership. In the event, according to the FT, Barroso, who was President of the Commission, contacted the main opposition politicians in Greece, who were against a referendum, and Papandreou was replaced as PM shortly afterwards.
Here we are now and presumably this time round a referendum will be held ( there is some talk around legality) although the nature of the question will be important as there is a lot of detail in the different proposals put forward by the Creditors and the Greek Government. The former also still appear to be far from united, with a particularly large gulf between the IMF and the Commission.

The exit is not the problem in itself its that after it there are only two outcomes:
Outcome 1: Greece recovers in which case others will follow Greece and the Euro is a failure or
Outcome 2: Greece plunges into chaos in which case a whole new level of instability is reached in that region and Europe becomes a failure.

Outcome 2 is the preferred option of the financialists. A catastrophic failure of Greece would lead to EU exit and solve a problem regarding refugees – Greece is no longer a conduit but it may become a source.
It’s messy.

Referendum anyone?

@Frank Barry

This blog is dominated by ‘finance’. More of ‘industrial economics’ …. without Michael Hennigan & FinFacts we would have few facts on the ‘industrial’ ….

@Gavin Kostick

American Pragmatism is taking a hammering … but one must hope ….

Habermasian Polity is taking a hammering … but one must hope …

Greek Democracy now has an opportunity to ‘nudge’ from Financial System Dictatorship towards more citizen-centric polity ….

@ MH,

We weren’t referring to jobs in exporting firms, some of whose output is sold on the domestic market. The latter share went down as export markets outperformed the domestic economy.

Instead we took exports as a share of sales (for foreign manufacturing, foreign services, indigenous manufacturing and indigenous services) and applied this ratio to employment in each of these segments. This is our measure of ‘jobs in export production’. (Some assumptions embedded here of course but still….).

Interesting stats. Thank you. I think, though, Ireland may probably begin to outpace Greece as a Chinese FDI location in the neartime!

What’s instructive about today’s events at the eurozone meeting is that all countries – including Cyprus – were in agreement about ending the Greek programme when it expires next Tuesday, thereby calling the Syriza ‘referendum’ bluff.

Rather cynically, I used to think that our political class were outstanding in the art of political dogs-dinner making, occassionally bordering on the delusional in little-big-man rhetoric about their influence within international institutions. Then again, all small countries have to talk big, at least for domestic political consumption. It covers up for their inevitable lack of capacity, which obliges small countries to concentrate their available resources in those areas of greatest priority to their own national interest in transnational political bargaining. When it works, e.g. in our case with agriculture, it tends to work quite well. That’s why it’s hard to get one’s head around what has now happened to Greece, when it should be apparent to their government that the worst impact of this debacle will be borne by their own citizens. In so many ways, it’s just very sad.

Hibernian quislingesque series contd.

‘[S]adly, for Mr Kenny’s pan-European ideal of a continent united in prostration before the money men, Greece’s rather more spine-enhanced prime minister Alexis Tsipras said he was going to put his people first not the creditors.

With unemployment in Greece nudging 30%, and more families relying on pensions from grandparents for survival than wages, Mr Tsipras told Mr Kenny and the other leaders he was not interested in playing games, but in protecting the vulnerable.

The knowledge that Greek success would make Ireland look weak was also behind Finance Minister Michael Noonan’s volley of less-than-helpful remarks fired at the Athens agenda all week.

Mr Noonan’s counterpart, Yanis Varoufakis, finally grew impatient with Mr Noonan’s petulance and burned him up with a witheringly condescending response to the gripes.

Mr Varoufakis explained that, if he were given the chance, he could explain in a mere 10 minutes the Greek position that Mr Noonan found so perplexing .

However, this may well be Greek mythology again as, after more than four years in power, the Government still does not get the fact that it would have been better to put the people before the bondholder profiteers.’

@Greek Citizenry

In solidarity.

This evening (Saturday) the eurozone finance ministers are meeting without the Greek minister, according to RTE. What happens now?

Despite his game theory research background, Varoufakis played his hand quite poorly over recent months.

Follow the logic

The Eurogroup will monitor very closely the economic and financial situation in Greece and the Eurogroup stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member.
We stand ready to assist and support Greece and the Greek people as required, following the expiration of the EFSF financial arrangement. [The statement is adopted by ministers from the euro area Member States, except Greece].

@Gregory Connor

All goes to show:’Theory’ and ‘practice’ are two different things! You need a particular set of skills and attributes to become a successful politician, which are quite different to those required for other professional callings.

As for what happens now,,,there’s a press conference with Mr Djissilbloem as head of the eurozone group, or at least one was scheduled. The next move appears to lie with the Greek side, as the institutions’ proposal is now off the table.

While the discussions on Grexit can be endless, there is one very clear message for Italy, Portugal, Spain: if there is even the slightest probability of capital controls, pull out our your money from banks immediately, like there is no tomorrow. At best, now.

@Gregory Connor

This is the statement from the press conference:

27/06/2015 | 20:36
“Ministers from eighteen euro area Member States and the institutions held an informal meeting to discuss the forthcoming expiration of the current EFSF financial arrangement with Greece, after the break-up of the negotiations with the Greek authorities.

The strengthening of EMU has been instrumental in helping the euro area to overcome the legacy of the financial crisis. We have notably advanced fiscal consolidation, implemented ambitious structural reforms, improved our fiscal and economic governance, deepened financial integration and established efficient firewalls. We are in a much stronger position than during the crisis.

Euro area Member States intend to make full use of all the instruments available to preserve the integrity and stability of the euro area. This will complement any actions the European Central Bank may take in full independence and in line with its mandate. EFSF and ESM remain the strong instruments with our full backing that they have always been.

We commit to take all necessary measures to further improve the resilience of our economies. We stand ready to take decisive steps to strengthen the Economic and Monetary Union.

We stress that the expiry of the EFSF financial arrangement with Greece, without immediate prospects of a follow-up arrangement, will require measures by the Greek authorities, with the technical assistance of the institutions, to safeguard the stability of the Greek financial system. The Eurogroup will monitor very closely the economic and financial situation in Greece and the Eurogroup stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member.

We stand ready to assist and support Greece and the Greek people as required, following the expiration of the EFSF financial arrangement.

[The statement is adopted by ministers from the euro area Member States, except Greece].”

I think you are better positioned than I am to interpret the finer points of this statement!

David O’Donnell

“All politics is local.” Tip O’Neill

Kenny/Noonan were not speaking to the Greeks. They were addressing the Irish electorate who will soon go to the polls. The last thing Kenny wants is Greek success (less debt and austerity) in the crisis of the moment or a quick rebound in the Greek economy in a few months following GREXIT. Sinn Fein would eat his lunch in the next election if the Greeks “succeed” by carrying through with their election promises — promises perceived by the Irish electorate as identical to those Kenny/Gilmore made before the 2011 Irish election.


‘The creditors are known thugs. They have engaged in harsh austerity, putting it in one of the very worst downturn in an economy not in a state of war , used Greece to launder bailouts to French and German banks, not given Greece credit for having implemented numerous “reforms” and broke the last government. Paul Mason is correctly very critical of how the creditors behaved last week. Even I was surprised that they’d press their advantage so far when Tsipras has already crossed a red line while desperately trying to pretend he hadn’t by claiming he wasn’t cutting pensions when actually doing so by requiring increased contributions from retirees.

But again, this goes back to the underlying and still apparently unresolvable gap between the creditor and Greek positions: many of the governments, all of which must approve a bailout, need to have Greece make what they see as meaningful pension cuts. Greece, as Samaras told Merkel in 2014, can’t go as quickly down that path as the creditors demand. And the IMF rejected the Greek finesse of tax increases because Greece has been told for years to fix its collection apparatus and has failed to do so. However, the brutal response should have been no surprise. Anyone who followed how Cyrpus was treated in its banking crisis would know how ruthless Eurozone institutions can be (in that case, the heavy was the ECB)’

In Game theory, removing oneself from the game is sometimes the only option.

This is what Gorbachov did with the USSR.

This week will concentrate the minds of the Greek people, it is looking unlikely the Greek banks will make it through the week to the 5th July.

Apparently 7 out of 10 Greeks would rather stay in the Euro, so if the referendum is phrased as “in or out of the Euro”, then the referendum should be passed and Tspiras and Varoufakis will be out of a job.

Then the next phase of the game should commence.

Beggars cannot be choosers, and my money is on Greece staying in, and Syriza out by 8th July.

Game on!

In his interview after the Eurogroup meeting, Michael Noonan reassuringly explained that ‘…… we have a fiscal union, a banking union…’.

Very productive meeting then.

Both of these stellar achievements inexplicably omitted from the communique.

So Tsipiras put remaining in office above admitting he lied to the electorate. He has thrown the hard decision back onto the Greek people and is refusing to state whether he will abide by that decision. He is against leaving the euro and austerity but can’t say what he is for.

Tsipras and Varoufakis seem to me to be playing a blinder. Over the last few months, they have confirmed that other members of the eurozone are unable or unwilling to enable a path that is better for Greece than default and semi-exit from the euro. They have now demonstrated this convincingly to their electorate. It has been time well and effectively spent.

Will the Greek government mandate that the 89 billion euros in Emergency Liquidity Assistance (ELA) provided by the ECB should be paid back in New Drachmas? That would be a sizable hit to the ECB’s so-called “balance sheet” but of course “balance sheet” does not have the same meaning for a fiat money issuing institution. If that happens, will the ECB monetize the loss via some mechanism? Meanwhile, the EU and IMF might also crystalize sizable losses of taxpayer funds which cannot be hidden by money creation.

One has to wonder, seriously. Greece is (?) a sovereign. Or does the acceptance of International Treaties dilute or extinguish this? Looks like it.

God help ye when TPP and TIPP arrive on our shores.

Wonder would a 5-day Greek bank holiday increase support for a yes vote?

Bloomberg says public opinion is at odds with Tsipras, according to a survey published Saturday. Two-thirds say Greece should remain in the euro area and 57.5 percent say the government should back down to reach a deal with creditors, the Kapa Research poll for To Vima newspaper showed.

Greek negotiators apparently first became aware of a planned referendum via Twitter.

As Greece does not appear to have a plan for restoring the drachma, Tsipras must be hoping for a Yes vote even though the Greek government is calling for a No vote 🙄 ❓

@ Mary Feely

Not even Cyprus supports Greece.

An exit would likely strengthen the euro in the longer term as Greece cannot rely on a surge in commodity prices as Argentina did more than a decade ago.

Win or lose the referendum, Tsipras may well lose.

It is worth noting that ELA is not direct lending by the ECB to Greek commercial banks. That would be direct liquidity support which has to meet tough collateral standards. ELA is ECB-approved lending from the Greek central bank to the Greek commercial banks. The Greek government has a contingent liability for all the debts of the Greek central bank including the money borrowed from the ECB to give ELA to commercial banks. If the ECB removes its approval of existing ELA lending, the commercial banks will have to tell the Greek central bank that they cannot pay back the ELA loans and they will be in default. This will trigger a default both by the Greek central bank and the Greek sovereign. So there is actually a triple default — the commercial banks, the Greek central bank, and the Greek sovereign are all in default if ELA approval is removed and the existing 89 billion cannot be paid back.

@ Frank Barry

What is striking about 2001-2007 is that the indigenous exporting sector added only 10,000 of the 440,000 increase in jobs in that period even though the food and drinks sector was selling more than 50% of its output in the domestic market.

Fancy that. They have the temerity to ask the Greek people if they are willing to accept terms that are contrary to the mandate the government was given. I presume the “adult” thing to do would be ignore the mandate, the Greek people and bow to ridiculous demands that contains no quid pro quo.

Excellent article by McCarthy today. Uncomfortable reminder for the sanctimonious euro group.

Looks like ECB will provide emergency support for banks pending the referendum.
Seems that the gamble is that the referendum will fail, Syriza will quit and then we’re back to robbing Greek pensioners to pay for the cocaine habit of the city of London.
Ah well pity nobody sees that the root of the problem is flooding of the periphery with cheap credit by poorly managed banks in the first place.
Pity too that people still use the term austerity while the correct term is financialism – it’s frustrating to watch this.

frank barry @ June 26th, 2015 at 8:09 pm – do you have a link to the review and/or name of the book being reviewed ?

@ David O’Donnell,

It is time you replaced ‘Blind Biddy’ with ‘Red Betty’.

As the saying goes… behind every great man is a great woman… Tsipras is no different. According to various news sites… if Tsipras gives into the creditors he loses his partnership and children.

Red Betty makes the bullets… Tsipras fires them.

By Peter Stanford7:05AM BST 19 Jun 2015

Very important lesson here… beware communists.

@ GC

Will the ECB withdraw existing ELA?

My understanding is that ELA covers a liquidity issue and not a solvency issue, albeit the solvency is now dependent on somewhat more dodgy assets than the ECB would require for direct liquidity support.

@ colm mccarthy:

“In his interview after the Eurogroup meeting, Michael Noonan reassuringly explained that ‘…… we have a fiscal union, a banking union…’.

Very productive meeting then.

Both of these stellar achievements inexplicably omitted from the communique.”

What Noonan actually said:

The assessment was that we’re in a much better position than we were following the collapse of Lehman Brothers when Europe was ill-prepared. Since then there’s a fiscal union virtually in place. There’s a banking union almost completed in place and EFSF has been established. More importantly ESM has been established. So there are structural changes and financial buffers in place …

Just listened to RTE news.

No new ELA but Friday’s levels will be maintained. That makes a bit of sense. KW is of course right that this liquidity support by the ECB and by implication the continued existence of Greece in the euro is the main leverage available to the creditors. Where I disagree with KW is that I think this to be an entirely appropriate linkage.

@ Kerchav

Greece is a representative democracy, not a Switzerland where there is constitutional provision for regular direct consultations of voters. Even in terms of the Greek constitution itself, the proposed referendum is of dubious legality. The referendum is a desperate last throw of a pair of irresponsible gamblers who are, even at this late stage, trying to fix the responsibility for bank closures on the head of the central bank, who happens to have been the finance minister of the previous government.

Varoufakis seems to be still under the illusion that he is in a lecture hall (as is the case with the other professors of economics involved in this debacle).

@ Michael Hennigan
”Not even Cyprus supports Greece.”

Even Sinn Fein supported our bank guarantee. Luckily there’s no such thing as groupthink in the Eurogroup. Also no capacity to recognise or adapt to reality.

The ECB campaign to infantilise the Greek government is nasty, bullying and poorly founded.

@ All


Last paragraph!

“I just can’t believe these guys are willing to torch their own country,” one investor with a large holding of Greek bonds lamented in an email. “They thought this was a game. Now, when the supermarkets run out of food, gas stations run out of gas, hospitals have no medicine, tourists flee, salaries don’t get paid because banks shut — what are they going to do?”

That is, indeed, the question!

All this tv footage of people queueing at ATMs in Greece and now the Greek banks closing for a week is great from the point of view of getting a desirable result in Ireland’s coming election. Fine Gael and Fianna Fail will feature it in their tv broadcasts and be able to say “that’s what will happen in Ireland if the electorate are mad enough to elect a left/SF government”. The contrast with Ireland could not be more stark. There are clear signs that its already having an effect. SF are slumping in today’s polls, while FG and FF are rising strongly. Combined with the continuing car crash that is the Irish Labour Party, there is now a real prospect of the Left in Ireland having a disastrous result when the election comes round. Back in January SF and various other left-wing parties, not to mention lots of media commentators and posters on here, attached their colours to the Syriaz mast. Now that the Good Ship Syriaz is sinking fast, I’m afraid they are going down with it. As for the unfortunate Greeks, their best hope is to vote ‘yes’ on Sunday next, after which hopefully Syriaz will be replaced by a more pragmatic and sensible government.

Semantics and technicalities. Whether or not the referendum is technically legal is neither here nor there in the context of delivering a sovereign democrat ice decision by the Greek people. Again, read mc Cathy’s article today if u need reminding about where the real illegalities began in this unholy mess.

No doubt it is the last desperate throw of the dice. These people are desperate. The euro group and their back room bureaucrats were counting on that desperation leading to a different outcome. They could be about to learn that when u have nothing more to lose u can’t be intimidated any more.

It is time to bring this hopeless euro project to its knees even if it means a bit of pain for us all for a few years. Hopefully the Greeks can get the ball rolling.


Listen again to Noonan – at 5.30 in, he said ‘… we have banking union, we have fiscal union….’.

No qualifications.


‘It is time you replaced ‘Blind Biddy’ with ‘Red Betty’.

Why would I do something so ridiculous? Have you ever heard of a ‘Troika’?

Your illogic, as always, remains impeccable.

p.s. Blind Biddy is in Corfu with the One-Eyed Shia Sheik and Paddy Zhukov for some R&R.


When will WWIII with the Axis of Odious Financial System & Deutsche Ordoliberalism be over? Neutrality ain’t possible this time locally … but the quislings remain in power … for now!


Those Treaties can be dodgy … we are all in the desert of the reservation now …. and those bleed1n cowboys are in control. Time to scalp a few …

@Tsipras & Varoufakis

Greece was screwed in 2010. Well played – this ain’t your debt.

“I just can’t believe these guys are willing to torch their own country,” one investor with a large holding of Greek bonds lamented in an email. “They thought this was a game. Now, when the supermarkets run out of food, gas stations run out of gas, hospitals have no medicine, tourists flee, salaries don’t get paid because banks shut — what are they going to do?”

Hope not too many Americans are going to lose their pensions because this guy’s analysis is a few slices short of a block of cheese. Greece is already a long way towards being self-sufficient in food, and towards creating a cash economy. They may have to prioritise between categories of imported consumer goods until they restabilise, but that won’t kill the country. There’s a good chance we will see a parallel currency before long. The Greek government has had plenty of time to plan and prepare.

Unless there are a lot of civil disturbances affecting tourist areas, falling prices mean that tourists are going to flock to the place the place – not flee – greasing the wheels of the cash economy.

@ Geronimo

A very interesting comparison between Greece and Puerto Rico and one that apparently supports KW’s argument that the solvency of the banking system is completely separate from the solvency of the sovereign.

The answer must be that whilst this is true of Puerto Rico it is not true of Greece. Greek banks’ solvency must be heavily exposed to Greek government default.

The betting markets are fairly firm that there will be no Grexit in 2015 (5/2 against). They must expect a Yes in the referendum. And as someone else on this blog has suggested, Tspiras probably wants exactly that result. In the ensuing election he will get the same sort of perverse bounce as the SNP did after their recommendation of Scottish Independence failed.

Fear will win over anger in the referendum – but anger will return in spades in a general election.

Aidan, your article seems to be missing an explanation for why all the good things it talks about throttled back during the Celtic Bubble, only to re-emerge when it burst.

@ Aidan Regan

According to the CSO’s Quarterly National Household Survey of the 80,000 jobs added between Q4 2012 and Q1 2015, ICT employment fell from 83,000 to 82,000.

As noted earlier, total FDI employment at the end of 2014 was still below the Dec 2000 level despite a 20% rise in the size of the workforce.

Since the early part of the last decade, Irish economists have had a mantra that rising services exports reflect a “move up the value chain.”

However, half the employment in the ICT sector is in administration according to a survey commissioned by the Government. In the financial services sector, it’s likely the same.

On Tuesday the Enterprise Department issued 3 ministerial press releases bragging about different things.

However, once again the issue of the annual report (the latest is 2014) of the Irish Patents Office was ignored by Richard Bruton, Minister for Good News.

The WIPO (Wold Intellectual Property Organisation) lists the top 10 Irish-based applicants for PCT patents (that can have validity in up to 148 countries) and it’s not an exporter but some place called the “College of the Holy and Undivided Trinity of Queen Elizabeth near Dublin,” that tops the list.

The FDI sector lost 10,000 net jobs in 2001-2007 and then there were further losses in 2008 and 2009.


Tel Aviv has been named as second to Silicon Valley in a ranking of the world’s top 20 high tech hubs but despite the success of the tech sector, it is not a jobs engine.

Israel has low PISA education scores alongside a high R&D-to-GDP ratio.

Although the public programmes to support high tech have benefited Israel’s export-led growth and offered a model for other OECD countries, their legacy is mixed, Mario Cervantes, OECD senior economist, said in 2011. “The returns in terms of longer-term job creation and income growth have not kept up, despite continued investment in high-tech,” he said. “Many Israeli startups are sold to the US market and get absorbed into global firms, never really expanding in Israel. This is expected given the small size of the internal market, but it does raise questions about how much of the returns from innovation end up back in the economy in terms of jobs created.”

According to OECD data, Israel’s information and communication technology sector accounts for about 20% of total industrial output and 9% of business sector employment.

While government policy has actively promoted high-tech industries, other sectors seem to have been left out. “With the exception of the information and communications technology services sector — which is very R&D intensive — innovation in other service sectors has received less attention, as illustrated by the weaker labour productivity performance of the business service sector compared to the US, Korea or the UK,” said Cervantes. “Perhaps this is because of — or despite — the competition as well as regulatory barriers that limit incentives for innovation.”

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