Ireland exits the EDP

Unsurprisingly the European Commission have concluded that Ireland’s “excessive deficit” per the reference values in the TFEU has been corrected.  The Commission decision is here.

The Commission have also published their country-specific recommendations on Ireland based on this staff report.

There is lots in the staff report but on the fiscal side in introducing their CSRs the Commission note:

[Following the abrogation of the excessive deficit procedure, Ireland is in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule.] In its 2016 stability programme, which is based on a no-policy-change assumption, the government plans gradual improvements of the headline balance until reaching a surplus of 0.4% of GDP in 2018. The revised medium-term budgetary objective  a structural deficit of 0.5% of GDP – is expected to be reached in 2018. However, the annual change in the recalculated11 structural balance of 0.1% of GDP in 2016 does not ensure sufficient progress towards the medium-term budgetary objective. According to the stability programme, the government debt-toGDP ratio is expected to fall to 88.2% in 2016 and to continue declining to 85.5% in 2017. The macroeconomic scenario underpinning these budgetary projections is plausible. However, the measures needed to support the planned deficit targets from 2017 onwards have not been sufficiently specified. Based on the Commission 2016 spring forecast, there is a risk of some deviation from the recommended fiscal adjustment in 2016, while Ireland is projected to be compliant in 2017 under unchanged policies. Ireland is forecast to comply with the transitional debt rule in 2016 and 2017. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that Ireland is expected to broadly comply with the provisions of the Stability and Growth Pact. Nevertheless, further measures will be needed to ensure compliance in 2016.

The Commission press release detailing all of the decisions taken and documents published today is here.

Comments

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16 thoughts on “Ireland exits the EDP”

  1. Funny old world. Ireland got loved again and gets out. But the EZ is a deflationary contraption.
    And it’s going to blow up, perhaps with Deutsche Bank.

  2. To say that there are no surprises in relation to Ireland would be an under-statement. This September 2015 note by the – excellent – research service of the Oireachtas is also of interest.
    http://www.oireachtas.ie/parliament/media/housesoftheoireachtas/libraryresearch/lrsnotes/LRSNoteEU_Fiscal_Rules__140342.pdf
    Page 9. The views of IFAC.
    “The move to annual revisions to the allowable expenditure growth under the
    Expenditure Benchmark has removed the multi-year anchor from the domestic
    medium-term expenditure ceilings. These multi-year expenditure ceilings represent a
    core component of the new domestic budgetary architecture. This system is not
    working effectively because the Government has consistently made adjustments to
    the ceilings. This undermines its value as an expenditure planning and control tool. The Government needs to clarify how the system of multi-year ceilings will operate
    under the revised EB framework.”
    Indeed, it does!
    As does the Commission (see footnote 12!).
    It is not just a question of an “expenditure planning and control tool” but rather one of effective macro-economic management, even to the untutored eye.

  3. Also worth noting from the Commission’s press release.
    “Finally, the Commission has launched a formal consultation to the Member States that are contracting parties of the Fiscal Compact to enquire about their progress in implementing in national law the provisions of the Fiscal Compact. The Member States concerned have two months to submit their observations to the Commission.”
    This is Ireland’s legislative effort in the matter of observing expenditure ceilings.
    http://www.irishstatutebook.ie/eli/2013/act/29/enacted/en/pdf
    As an example of a fatuous legal text, paragraphs 17. 2,3,4 and 5 would be hard to beat.

  4. ‘Following the abrogation of the excessive deficit procedure, Ireland is in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule.’

    For Ireland, NOW, this is patent NONSENSE. 65 ODIOUS Billion imposed on the Citizenry …. and the state STARVED of INVESTMENT to the detriment of present and future Citizenry.

    The Preventative Arm is German Ordoliberalism and the power of Financial System allied to the weakening of EU Democracy.

    I’ve already said enough about the atemporal, pseudo universalist, nonsensical abstractions within Angela’s Fiscal Corset [aka SGP] and I have yet to find an economist who can support these abstractions with any plausible empirical evidence! Not ONE.

    We badly, very badly, need an Irish Admin to stand up this idiocy; and, invest HEAVILY in useful infrastructure. I agree, which doesn’t happen too often, with young McCoy in IBEC on this one related to capital spending.

    And what do we have? Minister Noonan rolls out the white flag while inexperienced heads head up ministries; while FF set up the procedures for the next supine minority admin … and more white flags.

    p.s. Blind Biddy has emigrated for the mo … hard to blame her!

    1. https://www.pimco.com/insights/economic-and-market-commentary/investment-outlook/six-packin
      “almost all remedies proposed by global authorities to date have approached the problem from the standpoint of favoring capital as opposed to labor. If the banks could just be stabilized, if the “markets” could just be elevated back in the direction of peak 401(k) levels, if interest rates could just be lower so that borrowers would inevitably take the bait, then labor – job creation – would inevitably follow. It has not
      It is obvious that “capital” as opposed to “labor” – moving from 8 to 13% of GNI over the past three or even 30 years – has been the cyclical and secular champion. Why one or the other should be policy and politically advantaged is not commonsensically clear. Granted, the return on capital as opposed to the return to labor should logically be higher if only to encourage savings. But once an historical midpoint or range has been established, a relative equilibrium should be observed. Even conservatives must acknowledge that return on capital investment, and the liquid stocks and bonds that mimic it, are ultimately dependent on returns to labor in the form of jobs and real wage gains. If Main Street is unemployed and undercompensated, capital can only travel so far down Prosperity Road. ”

      The Germans are insane. We need to talk about untreated WW2 trauma and how trauma is transmitted across generations
      Then we need to build it into financial modelling

  5. The budgetary projections seem rather pessimistic (as they were in each of the past few years). Based on the Jan-April figures, Ireland is headed for a surplus in 2016. Of course, the Brexit referendum may cause a wobble in Q2 in the UK economy, which may have a spillover effect in Ireland, but hopefully it will bounce back in Q3 and Q4 if there is a vote to remain (which increasingly the polls indicate is the likely outcome – the latest one shows ‘Remain’ 18 per cent ahead).

    Excellent article by David McWillams:

    http://www.davidmcwilliams.ie/2016/05/16/daily-note-a-nation-once-again-dont-write-it-off

    He highlights what I’ve said here many times. The Union with Britain has been disastrous for the economy of Northern Ireland and is getting more disastrous by the day. The population of my own county, Tyrone, is one-third of what it was in 1841. Of course, it was even more disastrous for the economy of the Republic of Ireland (whose population fell by 65% between 1841 and 1922) until Pearse and Connolly paved the way for its escape from that Union, the best thing that ever happened its economy. Following that escape, the disastrous economic and population trends evident pre-1922 gradually moderated until 1958/59 (or so), then they completely reversed and since that time the Republic’s economic and population growth have both been the highest in Europe.

    @David O’Donnell

    As you are no doubt aware, the SF vote in N. Ireland is falling sharply. Time for FF to move into N. Ireland and finish them off.

    1. JTO

      Tyrone 1841 was the equivalent of Bangladesh today. The house was bet on spuds.
      Why not take a 50 year average rather than one year ?
      Partition has been a disaster for the border counties and towns such as Dundalk, Letterkenny, Omagh and Derry in particular.
      Ulster was deprived of at least 20 all Irelands because of it.

      Cavan and Monaghan shared almost all of the Ulster titles between 1920 and 1960.
      Tyrone won its first Sam in 2003 rather than 1943

  6. Ireland should leave the EZ before the Germans destroy economic activity on the continent. Or else collaborate with Italy and France to eject Germany.

  7. @JohnTheOptimist

    Methinks FF might need to move into Dublin first and qualify for the bus pass before getting on the Belfast Flier …

    You’re a good stats man: Take an All Ireland Focus and you might give us the breakdown of votes for each of the parties [recent in Dail + assembly in the wee-6] with relevant percentages.

    PBP did well and great to see Eamonn McCann get a job after seeking one since 1969! Best of luck with your support for Arlene on Brexit …. Blind Biddy is well ahead of you on this one and her recent chat with HRH on a possible reverse take-over went swimmingly!

  8. This is a “put that in your pipe and smoke it piece” for those who are either resigned to or get some pleasure from the application of the minutiae of the fiscal rectitude imposed by the EU’s institutions (or rectal fiscitude a la Barry Desmond).
    “The eurozone is economically moribund, persists with policies that have demonstrably failed, is indifferent to democracy, is run by and for a small, self-perpetuating elite, and is slowing dying. The wrong comparison is being made. This is not the US without the electric chair; it is the USSR without the gulag.”

    It is the money-shot of an op-ed by Larry Elliott, economics editor of the Guardian:
    http://www.theguardian.com/commentisfree/2016/may/20/brexit-best-answer-to-dying-eurozone-eu-undemocratic-elite
    and is the precis of a book on why the EU isn’t working to be published by Yale University Press in August.

    1. If I were a betting man, I would not put money on the prognostications of Larry Elliot e.g. “If the polls are right, Britain seems unready to trigger this act of creative destruction and it will be left to Varoufakis to do out of office what he could not do in power: prove a different Europe is possible.”
      The problem that the gentleman in question had was that he expected Europe to conform to what he thought was right when those he was negotiating with – from a position of strength – were of a different opinion. The negotiation continues; under different Greek management.
      http://www.bloomberg.com/news/articles/2016-05-20/imf-said-to-propose-deferral-of-greek-loan-repayments-until-2040
      That there is major political dissatisfaction in the developed world with the course of economic events is beyond question. But the fault can neither be traced back to the EU nor be confined to it cf.
      http://www.ft.com/intl/cms/s/3/02a07038-1dbe-11e6-a7bc-ee846770ec15.html#axzz49Cn69UVm

      1. FFS DOCM. THE EZ was built around 3 dud principles at the height of neoliberal lunacy viz

        that fiscal policy is ineffective; inflation is caused exclusively by money-supply growth; and the real economy quickly and automatically returns to full employment in response to negative shocks.

        The treaties are clearly deflationary.
        there is no bank resolution, no bank recap, no deposit insurance, no lender of last resort

        It’s heath robinson macro married to German WW2 trauma

        And it will destroy the European project

  9. “The problem that the gentleman in question (YV) had was that he expected Europe to conform to what he thought was right when those he was negotiating with – from a position of strength – were of a different opinion.”

    This is not correct. YV knew, well in advance, what the outcome was going to be. It had nothing to do with Europe and everything to do with Germany. He tried logic and reasonable persuasion to obtain a debt write-down (knowing that he was wasting his time – and would be dissed for trying) – so; “What’s the deal here?” The German political and financial elites had, not an plausible, persuadable opinion, but an rigid, concrete-clad, ideological, Bismarkian fixation; and it was carried. Varoufakis did not bend over the table, but a lot of other folk did. You can figure it out easily enough.

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