Data releases Post author By Seamus Coffey Post date March 10, 2016 Lots of data published today. From the CSO: Quarterly National Accounts, Q4 2015 Balance of Payments, Q4 2015 Consumer Price Index, Feb 2016 The Central Bank have the latest mortgage arrears statistics. The NTMA issued a six-month T-Bill at a yield of –0.22%. Categories In Economic Performance 48 Comments on Data releases ← Multipliers from Eurozone periphery austerity → The ECB’s Inflation Target 48 replies on “Data releases” Negative bond yields, negative inflation and almost 8% GDP growth. Few would have thought that possible ten years ago. Fantastic numbers. What a bounce back. Debt to GDP down to 95%. Debt burden been rolled over at negative rates. Currency and interests rates low and staying there for the foreseeable future. With the winds of ECB financial engineering at our backs the main obstacle to future growth is the chronic underinvestment in infrastructure over the last few years. ‘Chronic underinvestment in infrastructure’ Similar situations exist in Germany and the mighty USA. In the USA obstructionism from Republican pols to anything Pres Obama proposes is mainly to blame and in Germany the big business leaders apparently have Merkel under the thumb. All very wrong from a citizens perspective…. Neg inflation and 95% debt (ignoring private debt) is dangerous. Deflation increases the real value of debt. IE GDP at 7% – what’s the deal here? The Mean GDP for [IE; DE; GB; FR; UK; NL; PO and HU] is 2.3% (rounded up) – the Median is 1.35% The SD is 3.4% (N-1) ?? The RSD is 148% ??? Summat’s not right. A Black Swan soaring aloft on wings of feathers and wax? Good newz is good newz …. Begs the question of who gets it ‘good_er’ …. Michael Taft expands on Seamus Coffey here …. and in comparison to other small open economies …. ‘Ireland’s low and middle income groups are below the share of those same groups in the other small open economies. However the Irish top 20 percent group take considerably more than their counterparts in the other five countries. What does this mean in Euros? If Ireland had the same share of disposable income: Households in the lower income group would receive, on average, an extra €2,200. Households in the middle income group would receive, on average, an extra €2,300. Households in the high income groups would, however, lose on average €9,100. […] There are some who use the ‘squeezed middle’ trope as part of ideological discourse that seeks to blame low-income groups of being a burden on average earners and, therefore, argue for cuts in both social protection and taxation. This is far from the reality. http://www.irishleftreview.org/2016/03/09/unsqueezing-middle/ Good news but exaggerated! Superlative 2015 Irish growth data massively distorted by tax moves The immediate question is the stance to be adopted in the Spring Economic Statement (SES) and how this is to feed in to the proposals that will emerge on Dáil reform, including, if FF has its way, a “Parliamentary Office of the Budget”. http://www.irishtimes.com/news/politics/enda-kenny-outlines-key-priorities-faced-by-state-1.2568367 “Minister for Finance Michael Noonan warned earlier this week the Government may miss its deadline to submit its spring economic statement to the European Commission. Ireland is obliged to submit a stability programme update to the commission next month. The report contains key economic forecasts, the most important of which is projected growth rate. It is provided by the Department of Finance and does not require ministerial sign-off.” After the event analysis of figures released by the CSO, which raise considerable doubts as to their validity, will not help when it comes to steering the economy. One assumes that, assuming no new government is in place, the SES on this occasion will be simply an official document, and will be more sober than that produced last year. And base forecasts principally on data that cannot easily be queried e.g. various tax, labour and social welfare data. The Jan CSO release on industrial production had some startling numbers that presumably feed into 2015 GDP growth. A few snips: “The “Modern” Sector showed a monthly increase in production of 22.6% for January 2016 and an annual increase of 78.3% compared with January 2015.” “Basic pharmaceutical products and preparations increased by 19.0% in the month and 102.2% annually. Computer, electronic and optical products increased by 51.6% monthly and 92.1% year on year.” I think we need to start to get real about the notion that such nonsense numbers reflect any reality all in the real economy. PS. I see the ECB, having failed to get the 1% to start investing, has now come up with another ruse. A rolling 4 year social welfare subsidy for bank shareholders, not means tested! Not even a requirement that any profits made from the new direct subsidy be put into a special reserve. Extraordinary. Europe has had the Common Agricultural Policy (CAP) for decades, to subvent mostly wealthy farmers. Now we are to have the Common Bank Policy (CBP), to subvent bank shareholders. But the little people are still being subjected to the doctrine of ‘structural reforms’. Over the years the Irish national accounts have thrown up some surprises and talking points but the latest release is a real humdinger. A few of note: Real GDP rose by an average 7.8% in 2015 and by an annual 9.2% in q4. If there was no growth through any of the four quarters in 2016 annual growth would be 3.3% such is the strength of the carry over. The consumer deflator was 0.3%, that of government spending -3.1% yet the overall GDP deflator went up by 5.3%,, so giving a 13.5% rise in nominal GDP! How is that possible in a deflationary world ?. The export deflator rose by 6.5% and exports are now 120% of GDP. Moreover merchandise exports amounted to €144bn against a monthly trade figure totaling €111bn Exports in total rose by 21% and by 13.8% in real terms but were outpaced by imports so the external sector added nothing to real GDP growth, which was therefore solely due to domestic demand. On that, investment rose by over 28%, so adding 5.5 percentage points to growth, or around 70% of the total. An investment boom then except that spending on machinery and equipment fell by over 8% and building and construction rose by less than 10%. The surge in investment was due to a doubling of spending on Intangibles ( largely multinationals ) and this accounted for all the net increase in investment None of this matters in terms of recorded GDP, of course, which is now over €214bn with all that implies in terms of lower debt and deficit ratios although it should increase the caveats about any forecasts and cast further doubts on estimates of Ireland’s potential growth. The global macro situation is dreadful. Ireland is not ready for another crash. Neither is the EZ. Should it happen, Ireland will get shafted again. http://www.jabberwocky.com/carroll/walrus.html What Fine Gael has in mind in terms of improved budgeting. “FINE GAEL’S VISION FOR AN INDEPENDENT FISCAL AND BUDGET OFFICE The Irish Fiscal Advisory Council (IFAC) established in 2011 has emerged as a credible independent institution, fulfilling its mandate and increasing transparency on fiscal matters. The role of the IFAC will be enhanced, transforming it in to an Independent Fiscal and Budget Office (IFBO), which will work directly with a new Oireachtas Budget and Finance Committee. In addition to fulfilling its current function, the new IFBO will be available to cost election manifestos and budget proposals for all political parties. This will go beyond the costing of individual proposals which is already done by the Departments of Finance and Public Expenditure and Reform and look at the overall impact of a package of proposals. IFBO will also be mandated to have an increased focus on longterm fiscal issues. Furthermore, IFBO will engage with members of the Oireachtas on important fiscal issues through presentations and written output. IFBO will have a strong statutory right to obtain information covering relevant public sector authorities as recommended for independent fiscal institutions by the OECD.” No doubt, these are all admirable ideas but not relevant to the real problem i.e. how to manage the finances of the state and the economy in a controlled manner which promotes growth and overall durable economic well-being. The first step in that direction would be to plug the holes in the existing legislation, as sought by the Commission. http://www.finance.gov.ie/what-we-do/public-finances/medium-term-budgetary-framework-legislation It is clear that the legislation adopted makes zero difference to the present situation in which departmental over-spending may be adjusted by government decision without any binding requirement to make compensating reductions. Ministers are, in effect, holding the budget strings subject only to the legal requirements placed on heads of departments as accounting officers. It is not possible to envisage such an approach continuing and to expect any different result, especially from a minority government dependent on an agreement of some sort with other parties to actually adopt a budget (even if continued increases in the tax take, on the back of continued growth, allows the country to meet the letter, but not the spirit, of EU legislation). Another election will not fix this problem. There has to be cross-party agreement to see imposed, legally binding, annual expenditure ceilings which are not adjustable simply as a matter of political whim but subject to set procedures involving prior debate and discussion in the Dáil. The talent of all the politicians concerned in refusing to face up to this reality is remarkable, matched only by that of the electorate and the media reporting on it. The dodgy data on the state of the economy represent a minor problem by comparison. These will not be improved, in any case, until there is much greater detail and transparency on ongoing tax and spending. Which brings us back full circle to the need for the rapid modernisation of the system of government accounting. ” … how to manage the finances of the state and the economy in a controlled manner which promotes growth and overall durable economic well-being.” Nice sentiments. But if our governments continue to have to ‘borrow’ virtual money to pay for about-to-be consumed public services (health, educ., welfare, etc. etc.) … there ain’t no ressurection. The more you borrow the more negative your future rate of economic growth – since an increasing proportion of future economic expansion will have to be diverted to meet interest payments. Economic madness. Parish Pump politics rules! “The talent of all the politicians concerned in refusing to face up to this reality is remarkable, matched only by that of the electorate and the media reporting on it.” Please try to endeavour to persevere with the notion that the electorate have little if no impact on the decision making process. They may very well desire more and more welfare – but the actual decisions are made elsewhere – and the decision makers could always say NO!. But will they? Hardly. The media are abjectly pathetic – why? Maybe it makes better business sense to report the rubbish rather than the truth. And if they did report the truth? They would catch a mendacious earfull from some anonymous departmental spokesmodel. Stuff the truth! I don’t see the point of NIRP bonds Th whole point of caplitalism is growing money. If capitalists want to throw it away presumably they are more amenable to tax. http://www.irishtimes.com/opinion/cliff-taylor-the-economy-is-not-growing-by-anything-like-7-8-per-cent-1.2569726 @docm Tut … tut. Very poor form to peach on your chums on the neoliberal PD wing of FG … what would the arch PD 2002 architect of lite-touch regulation and upcoming senatorial candidate make of it? ‘the letter, but not the spirit, of EU legislation …. Tutorial XXXII The Fiscal Compact – Angela’s Corset – is abject pseudo-universalist atemporal economic NONSENSE … and potentially damaging to a nation’s well-being …. ordo-neo-liberals are wrecking The European Project … and European Democracy. It is to be hoped that the new Dáil, especially those members newly minted, will be reading this particular document. http://www.oireachtas.ie/parliament/media/housesoftheoireachtas/Ireland-Parliamentary-Budget-Review-Preliminary-Draft.pdf Page 21 Multi-annual budgeting and medium-term expenditure framework (MTEF): The CER 2012-14 introduced a “top-down” approach to medium-term fiscal planning, with three-year spending ceilings set out for each department (ministry), in a manner that would allow for “constructive, creative input from the public and the democratic system on how these resources should be prioritised in each area over the coming years.” To be contrasted with page 19. k) November-December – Supplementary Estimates: Towards the end of the financial year, the Dáil may be asked to decide on Supplementary Estimates, usually to cater for higher-than-anticipated spending in particular areas. “Creative” is the appropriate adjective. There are, in effect, no fixed expenditure ceilings. Who controls how they are to be observed, if they are genuinely introduced, or decides on how they are to be breached if the circumstances permit/dictate, is the CENTRAL political problem now confronting the country. There is no obvious decisive route out of this impasse other than continuing with the budgetary game as it has been played since the foundation of the state i.e. a majority government with the executive calling the shots. Update on the emerging FG/FF Special Purpose Vehicle The right-wing parties will be in government, but they also want to be the opposition From 1932, FF and FG had total control of the Dail. FF could usually rule alone. When necessary, Labour could be relied on to prop up FG. One right-wing party controlled government, the other controlled the opposition. Their differences were personal, tribal, stylistic, matters of detail – the differences existing within any large party. Essentially, we had one-party government, comprising two wings of the same party. http://www.independent.ie/opinion/columnists/gene-kerrigan/its-our-party-and-well-cry-if-we-want-to-34535003.html I hear a rumour of talks between FG and the DUP on coalition! Shurely not? The weekend has demonstrated nothing other than the desire of all parties to take a time-out. St. Patrick intervening, the progress of the nation being largely undisturbed by this fact. The opening paragraph of the executive summary of OECD draft report, which is rather tedious in its attempt to paper over what is not a very satisfactory situation in the matter of budgetary and economic management, is instructive. “Ireland’s two parliamentary chambers – the Houses of the Oireachtas – comprise the national forum for legislative deliberation and accountability in this mature parliamentary democracy. As in most “Westminster-style” parliaments, the lower chamber of directly elected deputies (Dáil Éireann) is primarily responsible for scrutinising and authorising budget allocations, while the upper chamber (Seanad Éireann) has a more limited role in budgetary matters. Over many decades, Ireland has developed a distinctive annual process for raising, allocating and authorising resources. In general, the government (i.e. the executive) has primacy, to the point of dominance, in budgetary matters. While Dáil deputies may table amendments (within tightly-restricted bounds) to tax legislation, de facto expenditure proposals may not be adjusted at all in parliament. In addition, the Dáil vote on expenditure does not take place until after the budget year has begun. In this context, many stakeholders and participants question whether the budget scrutiny processes of the Houses of the Oireachtas and its committees are meaningful or impactful. Some studies have placed Ireland lowest among OECD countries for effective parliamentary engagement in budgeting.” This continuing political conundrum remains unresolved. Who has control of access to the cookie jar? The answer, of course, is to take the issue out of the political arena and to put it into an institutional context which makes it a matter of considered judgement. In other words, the “Westminster model” does not work very well (a point about to be proven by the British Chancellor of the Exchequer, to give him him his full archaic title, next week). BSM if FG and FF go into power together. The 2 neoliberal civil war parties have the wrong macro model. Running a modern economy is a complicated business. The first rule must be to get your facts straight. The second must be, having found them, to distribute the democratic responsibility for finding the right path. http://www.ft.com/intl/cms/s/0/cf2c0fc8-e785-11e5-bc31-138df2ae9ee6.html#axzz42oHvPkyy There are no lessons to be learned from Westminster with regard to either. I would like to humbly apologise to posters for misleading them with my forecasts for GDP growth in 2015. Almost 18 months ago, back in Oct 2014 I predicted that GDP would grow by 8% in 2015. In the event, it only grew by 7.8%. I will have to review my methods to see where I went wrong. What’s rather comical about this thread, though, is the number of posters challenging the CSO growth figures, or quoting journalists who are challenging them. Calculating GDP and GNP is quite a complicated task. it involves calculating not only values for the output of each sector, but also separate values for the part of that output that goes into the Irish economy and the part that goes abroad. The CSO employs scores of statisticians. They are the best qualified statisticians in Ireland. Many have PhDs. Any poster here or journalist on the Irish Times, who wants to say the CSO figures are rubbish, should produce evidence that this is so, and also inform us as to what level of statistical expertise they have attained in their studies and careers, that qualify them to challenge the CSO statisticians. I wouldn’t have thought a PhD in Statiistical Analysis was high on the list of qualifications required to become a scribbler on the Irish Times. For my part, I think the CSO figures are probably very accurate. They are in line with the growth in tax receipts.They are also in line with what we know of the growth in individual sectors. For example, retail sales increased by almost 10% in 2015, car sales by 30%, goods vehicles by 40%, the number of overseas tourists by 15%, milk output by 15% (following the abolition of the quotas), and construction output by 10%. Having said that, the CSO figures will probably be revised in June. They usually are. However, more often than not, they are revised UP. Upward revisions are more common when the economy is growing strongly. So, fingers crossed, my 8% prediction might still come true and save me from humiliation. Exam Question: The Irish economy is growing at a world record pace of 8% and interest rates are 0%. Explain this little conundrum? John, easy up there. “I wouldn’t have thought a PhD in Statistical Analysis was high on the list of qualifications required to become a scribbler on the Irish Times.” Its a well established fact that many PhD wallahs learn more and more about less and less – and end up as ignorant experts. Its the scholars you need to watch out for. The ones who learn more and more about more and more …. These latter tend to eschew the limelight, are deeply skeptical and tend to ask damn inconvenient questions. “Calculating GDP and GNP is quite a complicated task.” No its not. Its actually rather simple (mathematically wise). You just have to avoid duff data. That’s where the real skill lies – ensuring (statistically wise) you are sampling reliable data. If I had a mind to (and I had the relevant info and data to hand) I might point out some inconvenient truths about the Irish economy. But there are others who can perform a more comprehensive coverage than I. The real, underlying, statistically assumed to be true (careful with that accuracy term – its properly called inaccuracy, for a very good reason) Irish economic rate-of-growth may be 3%, or thereabouts. In respect of both retail and vehicles you have to deduct-out the increase in credit that accompanies these estimates. You have to be awfully careful about any hedonics in the statistical estimates. Finally, you have to explain to those who might consume your estimates, that in respect of our current rates-of-growth, the economic reference base is 2000 (or maybe earlier), not 2014 or 2015. Big differ. @ JohnTheOptimist Common sense rather than a PhD is needed here. Last year industrial production rose by 20% and the “Modern Sector,” mainly FDI-related, had an annual increase of 36.5% compared with December 2014. Lots of spare capacity or maybe factories were magiced up by the tooth fairy! Last week the American Chamber of Commerce in Ireland produced its annual fairytale on US FDI investment in Ireland. The Irish Times carried a headline: “US investment in Ireland totals $310 billion, report finds – As a destination for US investment, Ireland is bigger than Latin America and China.” Bullshit and dangerous at that because too many believe this nonsense. Two striking points arise here 1) Investment doubled from 2007 and my calculation is that only 11,000 jobs were added in 2008-2015. 2) The AmCham quoted US Bureau of Economic Analysis data but BEA data also showed that US investment stock in Germany was $115 billion and US affiliates in 2014 employed 613,000 people there compared with 108,000 in Ireland. You get nonsense claims and empty bragging because massive tax avoidance is not acknowledged. This year the expected new Irish company Pfizer Plc will be Ireland’s biggest company. The NASDAQ has 26 “Irish” companies listed — only 5 such as CRH and Ryanair had their origins in Ireland. The others plus listings on the NYSE mess-up GNP and Balance of Payments data To get an idea of the scale of some of these fake-Irish companies that are tax resident in Ireland but mainly controlled from the US, just 6 have a combined head-count of 770,000. As for the intellectual property (IP) boost, this is fantasy growth that results from simple accounting double entries e.g. done at Google hq in California transferring the asset from Google Ireland Holdings c/o Conyers Dill and Pearman law firm, Hamilton, Bermuda, to Google Ireland Ltd, D4. When people believe that exports grew at double digits rates in 2014 and 2015 why would anyone be concerned about the enduring underperformance of the indigenous sector? 🙄 Unfortunately for Enda Kenny and his ministers, they listened too well to people peddling fairytales. @ MH, The effect on GDP growth of all of that is close to nil. @ SC There is a jump of 14% in Industry (including Construction which accounts for 10% of the total). Is this all real? Ex-Construction, only 4,000 jobs were added in 2015. Net exports are not significant but it would be foolish to ignore what has been happening in the Goods sector. Up to about 5 years ago, the Balance of Payments value of merchandise exports was typically €5 to €6bn below the customs value as the CSO made adjustments to exports/imports for double-counting, fuel exports to the North and CIF/FOB issues. In 2015 €31bn or 28% was added to the customs value of goods exports and €12bn or 18% was added to the imports value. The net additional value of what is possibly ‘contract manufacturing’ was €10bn in 2014. This tax avoidance stuff has no impact? Give us your estimate of the impact of tax inversions on GNP and BoP. Changes in the undistributed profits as a share of GNP should be identifiable from the published accounts. € @DOCM What if electorates are reckless, or to put it another way have a different time preference to that of the European Commission. The link below is to a paper arguing that four conditions have to be met for the euro to survive. One is that fiscal autonomy be returned to each member, as countries have differing preferences for social spending and tax levels. A country with too much debt would have to face the consequences, as opposed to a central bail out. http://www.voxeu.org/article/minimal-conditions-survival-euro @ MH, You ask “is this real?” Of course it is, unless you think the CSO are making up the numbers. The GDP numbers are as they are; value-added in real terms increased by 7.8 per cent in 2015. What is needed in careful interpretation of this figures. Myopia does not usually help with that. Yes, contract manufacturing has boosted the goods exports figures in the national accounts but so too has it boosted royalty imports. The CSO have carefully explained that the overall impact of these flows on GDP growth is negligible. http://www.cso.ie/en/media/csoie/surveysandmethodologies/documents/pdfdocs/ContractManufacturingInformationNotice.pdf Like many things in Ireland’s accounts the items on both sides of the ledger can be massive but the net outcome may be small. Intangibles may be contributing hugely to Investment but they are not developed here so their purchase increases Imports. Again this means the impact on GDP growth will be much smaller than the individual components. Aircraft investment fell by 50 per cent in 2015 but the growth effect of this was minimal for the same reasons. In rough terms I think half the GDP growth arose in the domestic economy and half the growth was the result of net exports. @Dan Hard to see the Euro making it. If the Germans were serious the EZ would have crisis architecture like bank resolution. The Euro memes are all neoliberal which is gibberish under NIRP. The emperor has no clothes. Over at the Fed people like Fischer are reduced to talking about inflation unicorns. And the political opposition to the status quo is only going to intensify. AfD are the latest. @ DMcL The problem with the paper to which you linked is that it sets up a thesis which has little or no basis in fact and then makes a big issue out of demolishing it. Not a particularly difficult task. “This is how the technocrats and political intelligentsia responsible for the euro’s creation saw things; since monetary union is not possible without political union, creating the euro was a way of forcing the pace of political integration.” If this were true, the various treaty amendments since the Maastricht Treaty would have reflected it. In fact, the opposite is the case, the categorisation of competences in the Lisbon Treaty making clear that the EU has only powers of coordination when it comes to the details of national economic and social policy, confirming that the member states have no interest in changing this situation, for sound objective reasons of political legitimacy, other than in relation to controlling the broad parameters of fiscal policy to avoid free-riding by euro member countries. To put it in a nutshell, it is up to each country to make its own societal choices but it must do so within the broad agreed budgetary parameters, a process which, in logic, means accepting legally binding expenditure targets at a national level. It is the achievement of the latter that is fundamental to the continued success of the euro. (Academic rumours of its early demise are exaggerated). Only a very limited number of EU countries have succeeded up to this point, largely because they are unwilling to accept binding budgetary targets, Ireland being a most egregious example. (The dyed-in-the-wool commitment of both politicians and large sectors of the electorate to pork barrel politics is the plainest message to emerge from the recent election). The easiest way to illustrate the point is to take again the example of Sweden which is of enormous importance as that country’s budgetary arrangements seemed to have provided the template for the European Semester, despite the fact that it has not adopted the euro. cf. http://eurocrisislaw.eui.eu/country/sweden/topic/budgetary-process-changes/ Sweden has since the above was written had a change of government AND a budgetary crisis. But the system has stood the strain. In sum, countries need such budgetary restrictions irrespective of whether they are in currency unions or not. By a coincidence of circumstances, if Ireland is to have a functioning minority government, it must agree these restrictions i.e. the first item of inter-party agreement must be to change the relevant legislation, indeed to agree these changes in detail beforehand i.e. to require approval of the Dáil to changes in the – rolling – three-year provisions. http://www.irishstatutebook.ie/eli/2013/act/29/enacted/en/pdf I am not holding my breath. @ DMcL In case you missed it, I posted this relevant link on the “multiplier” thread (a topic of total pointlessness IMHO) which is also of interest, especially the opening and closing articles, the first by the current Governor of the ICB, the second dealing in summary form with the Swedish budgeting system. http://norden.diva-portal.org/smash/get/diva2:701898/FULLTEXT01.pdf John FitzGerald raises the issue of distortions in his Irish Times column today: http://www.irishtimes.com/business/economy/national-accounts-skewed-by-foreign-owned-firms-and-spurious-r-d-1.2573001 1. Shouldn’t the CSO publish estimates — at least on an annual basis — of the impact of redomiciled firms on GNP and the current account? Assuming that the Pfizer plan to become Irish goes ahead, the distortions will be greater and it’s important for the credibility of national data to explain these developments. 2. My reference to “real” is not questioning the data used by the CSO but reality in terms of the economic impact of changes. Net exports rose by €10bn which was also the rise in net exports in the Chemicals + Medical devices sector. Exports in this sector based on trade statistics rose by 22% in 2015 and 59% from 2005 but in a decade, there has been no material change in employment. Crucially for the growth data, the export/import ratio is high at 4.6 times in 2015 and 5.6 times in 2005. In Feb the CSO said industrial production in the ‘Modern Sector’ grew by 36% in 2015 — this suggests little manufacturing processing involved while data for the Chemicals sector show that local Irish purchases of materials and services are below 10% of total spending — Irish sourced materials account for about 3%. 3. Irish food companies source over 80% of their materials and services locally. Food and drink companies employ about 50,000 — a similar number to the Chemicals etc sector. In 2015 food exports rose by €669m while imports rose by €506m — an unimpressive net exports contribution of €163m in a year when exchange rates were positive for indigenous exporters. This data are eclipsed by the magic figures from the FDI sector. Exports not a significant jobs engine for Irish economy @ SC ‘You ask “is this real?” Of course it is, unless you think the CSO are making up the numbers.’ The average citizen doesn’t follow a lot of this, but s/he can see this much. 1 The Irish economy is not just small and open. It plays a particular, specific, role in global corporate finance of the early 21st c. This role goes way beyond the notion of FDI. 2 Whatever the rights and wrongs of the various tax jurisdictions, the primary role of the Irish state in the matter is one of facilitating the minimisation of tax liabilities. Sovereignty can be traded, as CJH discovered. 3 The sums involved are enormous by Irish standards, and the Irish state receives a substantial consideration in return for this service. 4 There is a very influential and entrenched group of local vested interests which manages, and profits greatly from the exchange. 5 The financial figures are provided by the various global corporations involved, through their CFOs and delegates. 6 The figures are managed and audited by global Big 4 accountants, and the whole show is managed by local partners. 7 The CSO is a politically controlled body, which has neither the will, or the powers to investigate any aspect of the above. It wouldn’t suit. The difficulty for Joe and Jane Public is that this is exactly the sort of arena where control fraud is prevalent. Ethics free zone. Our banks went bust because our regulators were completely captured by global forces, leaving us with the bill. Notwithstanding your provisos, the CSO is hardly a reliable guide in this matter. The instincts of MH are probably sound. He doesn’t like the smell of it. https://en.wikipedia.org/wiki/Enron @ DOCM ‘To put it in a nutshell, it is up to each country to make its own societal choices but it must do so within the broad agreed budgetary parameters, a process which, in logic, means accepting legally binding expenditure targets at a national level’ You are of course the expert, but I doubt the matter is as simple as you suggest. The political choices available to a country are increasingly constrained by multi-national agencies such as ECJ, ECB, IMF etc. The general tendency of those agencies is to buttress the rights of existing property-holders in the face of government attempts to redistribute wealth. It is interesting that you should feel free to condemn national level redistribution as ‘pork barrel politics’ while disregarding the manner in which huge sums are redistributed upwards and towards already powerful financial corporations. As you routinely disregard that aspect of ‘responsibility’, you could be seen as arguing simply for a more centralised rational and modernised form of corruption. Surely not. These issues are neatly outlined by Wolfgang Streeck in his most recent book. Red cover and all. http://www.versobooks.com/books/1698-buying-time @ PQ The following is an item by Atticus (John Burns) in the Sunday Times of 13 March. —- Fine Gael’s Michael Ring has had a John O’Donoghue moment. You’ll remember the Bull’s ungracious speech in 2011 about the irony of losing his Dáil seat “in this magnificent sports complex – which I helped to build”. Ring is similarly unhappy with the voters of Mulranny and Aughleam in Mayo, for whom he “delivered”. “In Aughleam, I gave half a million euro for a hall, and got beaten two-to-one there”, the exasperated TD told the Mayo News. “In Mulranny, very substantial funding was provided to revitalise the area, and I got 42 votes [Jerry Cowley got 165], so you have to wonder, do people want delivery? I don’t know.” Perhaps they wanted a change of government, not just goodies. Also Ring should remember he was spending taxpayers’ money, not his own. And we don’t think the point of the Leader programme, from which Aughleam benefited, is to help junior ministers keep their seats”. —- That is what I was referring to in terms of pork barrel politics. Luckily for the nation, it is marginal in terms of the overall social redistribution policies that are followed and which studies have shown are effectively and correctly administered. It is the drag on proper economic management that such a perception of politics represents that I am addressing. It may be that the electorate is demanding more and in a much wider context. It is difficult to see any evidence for this in the election results. My take on Irish economic growth, Q4. Part real, driven by residential construction and tourism, part possible mirage but also the possible new normal to come (investments in intellectual property): https://rwer.wordpress.com/2016/03/15/explaining-part-of-the-irish-growth-anomaly-2-graphs/ @PQ Hegemony is never permanent. Even though most people believe their leaders the macro system does not work. There is huge discontent working its way through political systems viz FF +FG 50%, AfD in Germany, Brexit, 53% in France want a vote on leaving the EU and Trump. Lots of frustration is inchoate and easy for reactionaries like Trump to harness but the situation is evolving. Working class people across the OECD have been shafted in favour of the 1%.. Financial sector pricing assumes continued profit growth and stability. I would not. Very interesting new paper out from Goldman Sachs https://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf Such a pity Thatcher and Friedman didn’t live to see this moment John Fitzgerald on the subject. http://www.irishtimes.com/business/economy/national-accounts-skewed-by-foreign-owned-firms-and-spurious-r-d-1.2573001 Wonder where the money for real, i.e. domestic, investment went? http://www.oireachtas.ie/parliament/media/committees/pac/correspondence/2015-meeting1751911/PAC-R-2011-Correspondence-3C.2—Robert-Watt-Opening-Statement.pdf Page 5. In 2014, Gross voted expenditure was €54 billion. This is a reduction of over €9 billion from the peak in 2009. Current expenditure was reduced by 9.5% and Capital by 51.9% over this period. Michael O’Regan in the IT http://www.irishtimes.com/news/politics/grand-fg-ff-alliance-is-coming-but-it-has-to-be-done-slowly-1.2574386 A comment worth all the recent comment put together. If it comes to pass, there is a ready-made title, that of Grand Coalition i.e. that which exists in Germany and which might be said to reflect the natural centre-left, centre-right majority. It needs, however, a very, very strong system of financial discipline. How this is to be organised remains the fundamental question. @ DOCM The example cited from a Dublin-based journalist maybe unfair or not — we don’t know but while Sweden has typically large PR constituencies for the Riksdag — making members more likely to focus on national issues — it also has a strong system of community involvement, which Ireland hasn’t. The GAA went directly to Enda Kenny for cash to support the redevelopment of Páirc Uí Chaoimh in Cork and it got a promise of €30 million towards the €70 million project, which was beyond the existing sports budget. The Government then allocated additional money through a stimulus plan announced during the 2014 local and European election campaign! Local government TDs Jerry Buttimer and Ciarán Lynch lost their seats last month. TDs should have a role in advocating for their constituents in accordance with fair rules. Last December I wrote about the sorry saga of flooding in my hometown of Bandon and how a shopping centre had been built on a flood plain (which I recall used to be flooded even in mild winters) while a quayside flood defence that was a remnant of the original protective wall for the 17th century English settlement, was breached to enable car access. This is a classic case of the town’s people being shut out from direct consultation e.g. such as the American town hall model. The lack of community involvement between elections results in the rise of NIMBY groups opposing developments as there is often no other format to discuss their concerns while local authority representatives may take the side of developers. http://www.finfacts.ie/Irish_finance_news/articleDetail.php?Irish-environmental-vandalism-and-Bandon-flooding-444 @ MH You are missing the wood for the trees or, at least, the wood as I have defined it i.e. through a coincidence of circumstances, totally unrelated to any conscious decision by the Irish electorate, some Irish politicians, mainly FF/FG, are now faced with the choice between another election or entering a Grand Coalition where each member of the cabinet will have to be, as the Swedes put it, “his own finance minister”. They get a set budget over a rolling three year cycle and overruns in expenditure have to be met by savings elsewhere in the minister’s budget or courtesy detailed examination of the case in the relevant parliamentary (Dáil) committee. No high political purpose will lead to this situation. Simply political calculation. It’s a long shot! We will probably get the Grand Coalition, with an appropriate Irish fudge, and it will collapse. Budgeting on the basis of the Westminster model! http://www.theguardian.com/society/2016/mar/18/treasury-in-retreat-over-disability-benefits-cuts Two articles of interest. http://www.irishtimes.com/opinion/oecd-how-to-reform-the-d%C3%A1il-1.2577112 http://www.businesspost.ie/stephen-kinsella-free-education-free-water-but-at-a-cost/ All very sensible! But whatever happened to the European Semester and the constraints of EU budgetary rules? Not a single mention! It is not looking too good on the political front either, those involved apparently not being able to master simple arithmetic. Everyone here has such great expectations for ECB macro-economic policy but it can do nothing which would prejudice its primary aim of price stability and QE is already a step too far for the Bundesbank. Better direct your attention to the European Semester. Perhaps contributors are nostalgic for the glory days of the pre-Euro Irish central bank when its macro-economic policies allowed Ireland to absorb the 1970s oil price shocks, avoid stagflation and mass unemployment while maintaining the value of the Punt. We would never have had the Celtic Tiger if we had been forced to devalue the Punt in 1993! A promising straw in the wind. http://www.irishtimes.com/news/politics/enda-kenny-promises-reform-of-budget-process-1.2584930 “While some took this to mean Budgets would be agreed by committee before being sent to the Dáil, a Fine Gael source said the Taoiseach had only outlined the notion of early discussions by a budgetary committee. The source, however, did not rule out a vote at committee level, saying matters had to be discussed further. Such a process would introduce another element to the Budget process and reduce the impact of the traditional set piece-Budget being announced in the Dáil by the minister for finance. Budgetary plans One Independent TD said it would force groups such as Sinn Féin and left wing deputies to “put up or shut up” when it came to outlining their budgetary plans.” It is clear that it is the arrangements in the Medium Term Budgetary Framework already provide the broader framework within which such an additional element could be added or, rather, the essential first stage of a top-down budgetary process. This IMF paper from 2006 sets out how it works. It broadens the scope beyond the case of Sweden, which I have repeatedly cited, and shows just how few countries have managed to put it in place. A half-baked introduction will only make matters worse. (The omni-shambles of the UK 2016 budgetary process is a cautionary example). https://www.imf.org/external/pubs/ft/wp/2009/wp09243.pdf Apologies for some obvious typos. The reason why the MTBF is not working at either an EU or Euro-Area level will be obvious to anyone who ploughs through the relevant Irish documentation. It is excessively bureaucratic, static, and rules-based when the essential decision required is a political one at a national level i.e. setting out meaningful structured binding expenditure ceilings for three years ahead but on a rolling basis as on the Swedish model. http://www.finance.gov.ie/sites/default/files/140718%20Medium%20Term%20Budgetary%20Framework%20-%20revised.pdf Comments are closed.