Ireland: Country Report 2016

One of the less notable events over the weekend was the publication of the European Commission’s Country Reports.  The report will form the basis for Country-Specific Recommendations (CSRs) which will be published in May.  Here is the Country Report on Ireland for the few who may be interested – Ireland: Country Report 2016

44 replies on “Ireland: Country Report 2016”

The numbers interested seems set to increase if the signals generated by the Mexican stand-off between FG and FF are any guide.

To repeat the key comment in the Commission report (Annex A);

“No changes have been made to the legal framework defining the conditions under which expenditure ceilings can be revised.”

FYI all; essential listening, notably the views of a previous Taoiseach.

If the new scenario being sketched in of a greater budgetary role for the Dáil, in which everyone puts in his pennyworth in committee, is to be workable, the first item on the new government agenda must be to agree the legal framework that would define the missing conditions referred to by the Commission.

To be talking solely about fiscal space i.e. the room for additional spending when unanticipated overruns in the health sector can run into hundreds of millions is delusional, as would appear to be the large section of the electorate that takes the view that thinking solely locally can solve the problems of the country nationally.

Also of interest.

“Individual ministers would present detailed departmental budgets for forensic examination in advance to Dáil committees. It is simply the implementation of what was promised but remains undelivered. Fine Gael in government could deliver a budget, with opposition agreement, based on a limited number of principles. ”

One of the principles could be stated in the form of the answer to a question that would be understandable to even the newest TD; “what do we do if some department needs a supplementary estimate?”

From the executive summary

The recovery has been job-rich and has supported the economic rebalancing process. Full-time job creation has been sustained across
sectors and regions

There is an entire branch of the election narrative based on the opposite of that statement.

‘Monetary poverty and income inequality after social transfers are today below pre-crisis levels and euro area averages’ p 13.

The electorate. or at least a fair proportion of them, does not seem to believe that.

FF sets out its stall.

The most important reform is, unfortunately, missing. It may, however, emerge as a by product of the setting up of an Independent Budget Office.

A slumbering section of the DOF (ex. DPER?) may come into its own.

Its most recent circular opens as follows;

“Basis of Accounts

Appropriation accounts, showing the financial transactions of Government departments, are prepared in accordance with the Exchequer and Audit Departments Act, 1866 (as amended by the Comptroller and Auditor General (Amendment) Act, 1993) and with accounting rules and procedures laid down by the Minister for Public Expenditure and Reform. The accounts are a cash-based record of the receipts and payments in the year compared with the amounts provided under the Appropriation Act. The accounts also show prior year figures for comparison purposes. Some information of an accruals nature is included in the notes to the accounts.”


re: Public Infrastructure (Box 1.1)

“Public investment in Ireland has contracted very significantly. The government favoured cuts to capital expenditure over cuts to current expenditure, in order to maintain a high level of social protection. Public investment declined from 5%of GDP in 2008 to1.8%in 2013.Since then, public investment has only increased marginally and the government is targeting only mild increases in investment in the Infrastructure and Capital Investment Plan 2016–2021.However, the current levels of capital expenditure in Ireland are barely sufficient to replace the existing stock of public capital. Net public investment (government gross fixed capital formation minus the consumption of fixed capital or depreciation) was negative or close to zero in2012 to 2014 and is expected to recover only moderately in 2016 and 2017 to at most EUR1 billion. Ireland is now witnessing the emergence of capacity constraints in public infrastructure.”

The following comment on the sale of banks, despite the above acknowledgement of the starving of public infrastructure, effectively means that Commission really does not care tuppence about Ireland’s infrastructural deficit, as long as debt is paid paid down as quickly as possible, and the banks ‘returned to the private sector’; a private sector that bust them so spectacularly.

Page 11 and 12:

“Overall, the much improved situation allows the government to plan the disposal of some of its holdings in banks in the course of 2016. Investor interest is believed to be high and the government has indicated that it plans to use the proceeds to reduce the still very high level of public debt”


The whole notion that an accruals based accounting system will improve anything is nonsense. It will line the pockets of consultants and employ a few thousand accountants, but will add nothing whatever of value to the Irish economy.
Apart from an initial one month off adjustment that might amout to a few million, what earthly benefit is there, in knowing that the paper for the photocopier was a January expense rather than a February expense.

The only possible benefit of an accruals based system would be in major multi-annual capital projects.
The real beneficiaries of an accruals based system would of course go the the Big 4 or is it now the Bigger 4 consultants, while the rest of society paid for their brilliance in deciding whether an expense fitted more neatly into January or into February.
Meanwhile, as was the case with the banks, the gaping hole in the bucket, or the fact that there is no water coming into the bucket, escapes the Big 4 and Bigger 4 alike.

@ JR

Who said anything about an accruals based accounting system?

If you read the various DOF circulars, you will see that the business of keeping track of the existing cash-based system is farmed out to the “accounting officers” of individual departments (which change composition as often as there is a change of government) and there is no central computerised rolling control of daily expenditure.

We must learn to walk before we can attempt to catch up with other countries more advanced in matters of government accounting. There are, no doubt, advanced computer systems in various departments, notably the Revenue Commissioners, but there is, to my knowledge, no overall central system. If there is, it will come as divine surprise to me.

@ JR

Knowing where you stand with respect to the numbers is fairly crucial when it comes to hitting financial targets. I’ve seen it happen a couple where enterprises that seemed incapable of making their numbers work, were turned around fairly quickly simply by tracking where they stood versus monthly targets, every single month. Without that discipline the job is very hard because the executive team is constantly pulling in different directions. You need finance to make your projects happen, and to make finance work you need a hard-nosed financial officer, preferably one who does indeed know whether the photocopier paper is a January or a February expense.


As I indicated on another thread these reports are just staff working papers and are binding on neither the Commission nor the national authorites. In addition they are subject to a thorough review by the relevant national authorities (presumably and mainly the DoF in the Irish context) before they are published. This generates no end of diplomatic language. For example there are 21 references to “difficulties” or to things being “difficult”. (it includes the glorious understatement that “Irish Water has had a difficult start”.) And there are no fewer than 35 references to “challenges”. Great effort is devoted to using language that will avoid addressing the bleeding obvious.

The Irish authorities pulled the wool over the eyes of the Troika when it had some power to force necessary changes; it doesn’t have any real power now.

The FF proposals are typically and cynically characteristic of this faction. Having maximised and abused the excessive dominance of successive governments over parliament for as long as possible, it now finds it of politicial benefit to reject this approach and to advance major changes that could alter the balance of power between parliament and governments. But even though a leopard cannot change its spots we shouldn’t look this gift horse in the mouth. Any changes to rebalance the respective powers of the executive and the legislature should be welcomed – even if what FF is proposing has less to it than meets the eye. There is no way a party aspiring to govern in the future will tie itself hand and foot.

But it is a a long overdue start and it puts it up to the other factions and individuals. But there is a very limited window of opportunity. Even though they can get quite het up about the outcomes of the parliamentary process, most voters tend to pay little attention to the parliamentary processes and procedures themselves. If ’twere done, ’twere better ’twere done quickly before the self-serving denizens of the Law Library scupper the effort.

@Dan McLoughlin,

The sub-section to which you refer (and the associated chart) highlights the “great redistribution” in Ireland. Even with constraints on the amount of largesse the redistribution continued to be proportionately greater than in other EA or OECD countries – because the inequality of market income distribution was even more extreme. The increased support for non-mainstream factions refelcts a popular perception that the redistribution was constrained because of the “no bondholder left behind” policy and the reality that the black and grey economies also shrunk broadly in line with the official economy.

@ PH

There is, of course, a question mark over the amount of leverage that the Commission can exercise and it is true that the outgoing government did not play a blind bit of attention to it once the economy began to turn and enabled it to stay withing the broad agreed budgetary parameters. But the new budgetary control structures are only bedding in across the EU and there is a limit to which any country, especially one as indebted as Ireland, can ignore them; not to mention the markets if this limit is breached.

The central point is, however, a political one. The approach of the outgoing government was not, on the election outcome evidence, acceptable to the Irish people. There is a mood for change and the Mexican stand-off, as I described it, between FF and FG, is pushing things in the right direction. Not that FF has changed its spots, or FG or any other political party or individual TD; with the definite exception of the Social Democrats (amply rewarded by the electorate).

The media, especially the more parochial and blinkered the commentator, is playing catch-up, the best example being the failure to note the muted reaction of FF to questions on the future of Irish Water, the FF commitment to abolishing it being from a familiar stable of totally irresponsible political promises. The reason is that it is the one step that not just the Commission, but the other instances of the EU involved, would find impossible to swallow; and FF know it.

The fact of the matter is that it is the expenditure which constitutes the vast bulk of government outlays i.e. day-to-day spending that matters. We only have tenuous control of it. Dáil reform will make absolutely no difference if this situation is not also remedied.

This link to the website of the Swedish National Financial Management Authority will be of general interest, especially the embedded document links.

Just wondering what sort of debt load would be safe in a EZ deflating at say 1% a year.


Colm McCarthy was at his pithy best in his latest Sindo piece:
“There is an alternative to addressing problems in health, education, housing and so many other areas through promising to spend more money, the Midas Delusion to which political candidates are so prone. The alternative is to deal with the vested interests which have contributed to the inefficiencies in the first place.”

Obviously it would be impossible to tackle all of the vested interests that are embedded in every activity across the the sheltered private, public and semi-state sectors, but it is possible to hit a representative selection, to generate an efficient and equitable solution and to address justified public disgust and anger by tackling the glorious convoluted scam that is Irish Water.

Resourcing and empowering Oireachtas Cttees (with chairpersons elected by secret ballots) to tackle issues like this would be a major step forward.

@ PH

First things first!

There is no way that FF are going to let go, in terms of press – equivocal and non attributed – briefing, of “the gift that keeps on giving” that is IW. The problem is that treated water and waste water treatment have to be paid for and the money must come from somewhere, the EU legal position being almost certainly that it must be the user.

Which brings us back to the issue of control of expenditure.

If this carry-on continues, and there is every likelihood that it will, the benign view that markets are taking of the situation may well change and pull all involved up short. And scupper the one thing that would get them all off the hook; continued economic expansion.


The entire restructuring of the water sector and its subsequent functioning is characterised by a complex web of deals, scams, fixes and fiddles to protect and advance the positions and privileges of a broad range of special interest groups at the expense of the majority of citizens. There is no quick politicial fix that will make this problem go away. A quick and dirty political fix was applied by a panicked government in Nov. 2014 (and while DG Ecfin officials were in town) and that just made things worse.

The full complexity of the web of deals, scams, fixes and fiddles will have to be confronted and then it might be possible to begin thinking about a resolution of this mess.

The silence of the economists here is deafening!

The Commission’s webpage on Ireland.

The reality which the entire body politic insists on ignoring.

“Ireland is now subject to post-programme surveillance (PPS) until at least 75% of the financial assistance received has been repaid.”

The game of double and triple bluff on Irish Water is taking place in a parochial bubble which never ceases to astonish. It now raises questions as to whether Irish politicians even understand their responsibility for promoting respect for the rule of law. And for the media to at least point this out.


You may be making too much of a meal of the EU angle (and the sovereign bond market angle). I agree Ireland is subject to surveillance, but the Commission is both unwilling and unable to apply any effective sanctions. As I observed in my previous comment, when the Government, in its panic, applied the last attempted water charge fix in Nov. 2014 the Commission officials conducting one of thier periodic surveillance missions were in town. When they raised objections to the fix the Government was minded to apply they were told to take a hike.

This is taking place in a national bubble and the Commission will stay well away from it. The complexity of the scam overseen by former ministers Hogan and Rabbitte was a thing of beauty. It had numerous moving parts but they all meshed to satisfy the the various rent-seeking special interests participating. Unfortunately some of the participants were so totally blinded by the cleverness and complexity of the scam that they gave no thought to how the long-suffering citizens who would be funding it via a combination of taxes and charges might view it.

It was not surprising that, given the complexity of the scam and the extent to which the machinations were hidden, when citizens started to grumble they often got the wrong end of the stick. And they were encouraged in this by various left-wing activists (and other populists) who were seeking to protect and advance the special interests they favoured at the expense of other special interests (and of course at the expense of the vast majority of citizens).

Initally, FF had no problem with what the Government was advancing because it was far more cunningly and cleverly crafted than their initial attempt and FF was keen to mollify and square precisely the same selection of rent-seeking special interests.

The web of deceit spun by all of the participants is so tangled that it will be interesting to see how it will be disentangled – if at all.

The Commission operates as a neoliberal outfit and the the memes of neoliberalism are incoherent given that monetarism can no longer generate growth since the 1% own too much and will not invest and debt no longer doesanything.Germany is deflating. The Govt should tell the Commission to cop on, PFO and come back when it has a new coherent ideology.


Vincent Browne did make an interesting point that the Left had opportunistically jumped on anti-tax bandwagons — even before VAT, the argument about double-taxation did not wash as drinkers of pints of plain would have known.

Ireland was the only OECD country (all 27 developed + 7 emerging economies) during the boom that did not have a residential property tax..

The outgoing government deferred until 2019 revaluation of properties and buyers of new homes are exempt until that date— all politicians are likely to oppose any change.


I’m not sure there is anything left to say about Irish Water. Most if not all economists would agree with the idea of the user pays, in terms of Utilities, as per electricity and Gas, and one could obviously add safeguards re users on low incomes. That was the initial model but we ended up with a flat charge , well below cost, which is not a sensible way to price a limited resource. Similarly, as pointed out by the EC report, capping rents will probably damage housing supply .

The election was the first in Irish politics in which the main parties set out how they would allocate the forecast level of fiscal resources, but the media decided that was ‘boring’ and not to be discussed in the televised debates. Of course the forecast level of growth may turn out to be wrong but at least it allowed a simple comparison of economic platforms. For example, Sinn Fein had no net cuts in personal taxes and an increase in total taxes, with all the resources used to fund exchequer spending, with the others adopting varying splits between higher spending and tax cuts. The platforms also begged some obvious economic questions, which might have borne closer scrutiny. Some examples: is it possible to simultaneously increase the number of doctors and consultants whilst introducing a new tax rate on higher incomes; why are tax cuts needed to ‘keep the recovery going’ if the recovery has been strong to date ; how can abolishing water charges save money for those who have never paid them?.

No party mentioned that according to the Government’s own official forecast, Ireland is booming, with the economy operating above capacity. The implication is that we no longer have a significant cyclical unemployment problem, and that most of the unemployment is structural. Those economic assumptions may be wrong, of course, but that is the current Finance view. It is also of note that employment growth slowed sharply in the latter part of 2015, and that male unemployment actually fell in q4. A temporary blip or support for the structural unemployment view?

@ PH et al

The point that I have been making consistently is that the quality of the Irish political class is of such mediocrity that only events will prod it in one direction or another and that, absent a government, the natural impetus of both the day-to-day public administration, and the new EU constraints, will be what matters.

It seems to me, even after just a few days, that this thesis is being borne out, the really decisive factor being the one lucky inheritance from our colonial past, a functioning public administration and legal system and, more importantly, respect by the vast majority of the population, not always including elected representatives, for both.

The FF position on Irish Water or, rather, the payment/non-payment of charges, is clearly indefensible. Nothing could have confirmed this more than the forced concession by one FF TD today that, not alone would there be no refunds in the event of the body being abolished but that bills should continue to be paid because that was what was “legally required”.

It is not the business of the Commission to intervene in the detailed workings of any government. Certain budgetary objectives are set by the troika. While a country is “in a programme” i.e. technically broke, there could be no disputing them, as is currently the continuing case in Greece. In short, “if you want the money, these are are conditions being set by the countries putting it up”. But the borrowed money has also to be paid back and the approach of the creditors is clearly to try and ensure that this happens by dictating certain budgetary parameters that must be adhered to. Indulging the debtors in a debate such as is now occurring on the second great Irish hang-up, that of clean water as a human right which it is up to others to pay for, does not fit into this approach.

Over the next few weeks, events will force all parties into a detailed, almost line by line, discussion of budgetary issues if any grouping is to agree a durable programme of government. Given the collectively bizarre performance up to this point, matched only by an equally bizarre reaction by the electorate that put them in that position, it is difficult to be in any way optimistic.

The worst thing about paying off the bondholders was that the fuc$ ers didn’t reinvest the money. The EZ is now deflating. 60bn could have been invested for growth. Next time bondholders get nothing. There will always be others to borrow at 1% LOL.

Why not nationalise Irish Water? It could be run as a state-owned monopoly! Surely there could be no objection from socialists.

The IMF was SFA use giving out neoliberal advice when the ideology is now clearly deflationary. Maybe a dose of socialism would do it some good.

@Colm McCarthy: The Trots and Leninists surely want to, in their traditional fashion, liquidate Irish Water.

Seriously, though, why should I ever comply with my financial obligations if there are going to be idiots in politics promising me that I won’t have to pay, and if I have been so foolish as to pay, I won’t be reimbursed.

Maybe we’ll have the Troika back at this rate. Next time it’ll be no more Mr Nice Guy.

Irish Water may yet break Fine Gael. Expect to see the Social Democrats rip the political guts out of them now that they have a serious national profile. Residential water metering in Ireland, and the infrastructure behind it, is as poorly conceived as electronic voting once was, and potentially much more scandalous, being a huge ideologically-driven sunk cost of very little economic value.

Irish Water is spinning that this infrastructure’s value will be lost if it is disbanded. The reality is that residential water meters arguably already have negative economic value, so a huge loss has already been incurred, and is being hidden in plain sight. All that remains is to kill the pretence.

It is nice to note that the national broadcaster finally twigged it. The message from both FF and FG is “pay your water bill” and this has now been conveyed to the populace courtesy the wonders of modern communication.

This sudden attack of plain speaking on the part of FF is, no doubt, attributable to the late realisation that there is a legal obligation to do so and that no political party can overturn it.


It may not have made sense to install the meters, but sunk costs are, well, sunk. It does not follow that the meters should now be abandoned, although such a case could be made.

That water charges (net cost less than the TV license fee) should have come to dominate the post-election debate is quite extraordinary, even by the standards of Irish politics. Bringing back the troika is not a good idea. Just the IMF would do.

My main point is that Fine Gael should be crucified politically for having put in the meters. It is electronic voting again on a much larger and more wasteful scale, pursued at a time of austerity when almost any other possible use of the funds would have been more efficient. Those politically responsible should get 20 times the political damage that those responsible for electronic voting did. Helicopter money would have been better because it would at least all have gone into the Irish economy.

Should the meters be abandoned? Maybe it is worth keeping them, but my guess is that the ongoing costs of maintaining, reading, managing, and processing the data from them substantially exceed the value that is gained through identifying leaky homes. If that is the case, we should either leave them to rot quietly, or sell rights to mine them for re-use in countries where there is a shortage of unprocessed fresh water.

Irish Water is shorthand for working class dissent. The people who were loaded disproportionately with crash losses didn’t see much in the way of upside .


I don’t think it’s any way extraordinary that water charges are dominating the post-election debate. It’s not possible to identify which element (or elements) of the cunning and complex scam that was orchestrated by Minister Noonan and former ministers Hogan and Rabbitte (ably assisted by their officials, by the CER, by the local authorities’ water divisions’ management, staff and unions, by the management, staff and unions of BGE and by the accounting, IT, legal, management consulting and PR service providers) that provoked ordinary citizens to take to the streets in October and November of 2014. Maybe it was the sight of these “fat cats” gorging themselves in a new trough that they were funding. Maybe it was because they felt they were paying for water and waste water services already via general taxation and were damned if they were going to pay again – however small the annual charge might be. Maybe it was because they smelled a rat or because water charges were the straw that broke the camel’s back. Who knows?

But irrespective of what provoked them the sight of ordinary voters on the streets panicked the government – and it also had a powerful impact on FF. Apart from the usual left-wing provoked rent-a-mobs, ordinary Irish voters very rarely take to the streets. They tend to bide their time patiently until they have the opportunity to cast their judgement in the polling booths.

Now they have cast their judgement and the requirement to do something about Irish Water and water charges is the one thing that unites all TDs opposed to the outgoing government.

Unfortunately, it’ll probably be a political fix because the politicians, policy-makers, regulators and the plethora of greedy special interests involved have fouled the pitch so much that securing popular consent to any sensible policy is not possible for the foreseeable future.

I’m a municipal counsellor in a small mountain commune in France. We run our own water supplies (unfortunately that is soon going to change, but that is another matter). Our population is very dispersed, so the fixed costs of providing water dwarf the variable costs. In addition, installing meters costs money. We therefore impose a fixed charge per household, but meter the one or two large industrial users (and doing so has cut their consumption enormously).

My instinct is that if the big problem in Ireland currently is the network, then the priority should be to fix that; and agree that installing meters in that context was a huge waste of money during a time of austerity. I also agree with Colm that we don’t want to uninstall them now, but it is understandable that some voters would want to punish the government for having made a bad mistake. And there was also the business with the PPS numbers, the stories about well-paid beurocrats, and the stories about bonuses which for many people are even more irritating. Finally, many (including myself I must say) have an aversion to having a company of any sort, as opposed to the State, controlling water supplies. It’s logical for voters to judge the outgoing government on the decisions that it made, rather than on the decisions that were made for it by the Troika. Irish Water was made in Ireland, and in that context it’s perhaps not surprising that it became such an issue.

The outgoing government had no shortage of money to spend on its favourite beneficiaries, the bondholders, the banks, the bankers, retiring bankers etc.

AIB accounts published today reveal the following ‘termination benefits’ under its ‘voluntary severance programme’.

2015: 37 million
2014: 24 million
2013: 86 million.
That is not small change, even to an entity as big as Irish Water.

In addition, as an incentive to go from defined benefit pension to defined contribution pension, the state owned AIB will happily contribute to your new pension, from 22% up to 28%, depending on age, while 50% of private sector workers have no pensions whatsover.

Another expense caption now has the rather novel label of:
‘Restitution and Restructuring expense’
Ergo, the State owned bankers are being restored to their former glorious terms and conditions.
(Notes 11 and 13, page 215 approx)

The end result of all this is that Irish ‘industrial relations’ will become chaotic in the next few years, as ordinary workers wise up to the reality that their efforts ‘saved’ Ireland for benefit of the elites.

@Kevin O’Rourke: you say that you don’t want water supplied by a company of any sort, but rather by the State. Do you object to a 100% State-owned company, such as Irish Water? Why? Do you think a Civil Service department is the appropriate body to run a complex and technically-demanding organisation?

One thing that those who would like to see meters uninstalled/scrapped/abandoned forget is that domestic consumers at present can pay less than the basic €260 per year if their metered consumption is low enough to warrant it. Do one want to reward frugality this way? A bit like sticking it to the law-abiding by refusing them a refund if charges are scrapped.

I see reports of a request for tender from Irish Water for materials for additional installations of water meters. May I suggest, if any of our new TDs happen to look in here, that this might be a good opportunity to test the supposed new-found primacy of the Oireachteas? I suggest a Dail motion to instruct Irish Water to suspend new installations of domestic water meters, and refrain from forming new contracts relating to them, pending further instructions from the new Cabinet.

Dan O’Brien on possibility of the country becoming ungovernable.

The analysis could hardly be improved upon. However, the likelihood of any electoral change being zero (the Kingdom would not stand for it!), salvation has to be sought in other directions.

The conundrum of how countries with ostensibly equally fragmented parliaments can have such different economic performances (Italy versus the Netherlands) is readily explained. There is a fundamental consensus between the organised sectoral interests (SI) on a basic societal foundation, built around social market economic principles, in the successful economies. It is lacking in Ireland, the fact being masked by blanket spending in good times and even in bad.

This consensus can only be achieved in Irish circumstances by detailed line by line examination of taxation and spending. The hope must be that the task of cobbling together a government capable of adopting a budget will bring this about.

It would have been a help had the outgoing government put in place the administrative capacity to enable this to be done. It is never too late.

“Stability” means only: the privileges (pecuniary and other) of the cosseted shall not be altered no matter what the economic situation of the country and the elected dictatorship is there to make certain of this.

I say bring on the instability. Wonder what it would be like to have a Dáil that actually had some power and impact on legislation. You know: a democracy.

@ EB

“In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it”.

Alexis de Tocqueville

The Irish political class is like an unruly school class when the teacher is out of the room. However, the more sensible students can hear the footsteps coming down the corridor, notably the finance spokesman for FF.

political instability is the price of plutocracy. Trump, Brexit, the Irish election, Sanders. Neoliberalism is dying . Snp500 sales are stagnant. The EZ is a neoliberal project. The memes are now useless. 7tn in NIRP Bonds globally. Tell that to your handlers.

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