More on the Revised GGB

The Department of Finance explains the data revision here.  In terms of the GGB in 2010 and subsequent years, there is an interesting set of communication issues.  As per the DF note,  one approach is to make a sharp distinction between the ‘headline’ and ‘underlying’ GGB with the difference consisting of the ‘unrequited’ capital transfers into Anglo-Irish etc. (as opposed to the equity-type investments in AIB and Bank of Ireland).  This distinction may be effective if the bank-related capital transfers are a ‘once off’ event or a “twice off” event (ie 2009 and 2010) but may lose its force in relation to a steady sequence of capital transfers over the next decade.  To the extent that the promissory notes spread out the capital transfers over a long period,  this may be a downside to this approach relative to making a larger-but-final capital transfer in 2010.

Update/clarification:  The promissory note approach will not affect the timing of when capital transfers hit the GGB  (once the capital transfer is decided, it hits the GGB in that year in line with accruals accounting) or when the fiscal cost of bank re-capitalisation hits the gross government debt (again, it hits the gross debt at the time of the commitment, since the liability has been accrued).  Moreover, the impact on the gross debt happens immediately even if it takes time (as in the 2009 case) to determine whether the re-capitalisation is an equity-type investment or a capital transfer. The promissory note approach just spreads out the timing of the cash payments.

The UK Election: Economic Analysis of Key Issues

The CEP at the LSE is releasing a series of briefing notes on some of the key economic issues facing the next UK government: you can find the list here.  Among the recent contributions are Luis Garicano on financial regulation and Brian Bell on bankers’ bonuses.

Economies with Large Banking Systems

The IMF has released a new report on the challenges facing economies that have large banking systems: Ireland is included in the analysis.  The report is here and the abstract is below:

Summary:
This paper examines cross-country perspectives on economies with large banking systems relative to GDP. As such economies tend to have domestic institutions with major foreign currency cross-border activities, strong links are generated between the health of the financial system and sovereign sustainability. These links are of central interest to the paper. It does not cover off-shore centers as their international links tend to be relatively unrelated to domestic activities.

To make the analysis more concrete, the experience of five economies—Hong Kong SAR, Iceland, Ireland, Singapore, and Switzerland—are featured (plus a Box on the Benelux region). These economies had large and relatively diversified international banking sectors compared to their fiscal capacity before the global financial crisis of 2007–09, and divergent experiences over the crisis. The paper analyzes the reasons for these outcomes. (A range of private and public sector individuals were interviewed during missions to Belgium, Hong Kong SAR, Ireland, Singapore, Switzerland, and the United Kingdom.)

Sovereign Risk in Europe and the Euro Area

The IIEA and Law Society are running a seminar on April 26th on this topic  – details here.  Among the speakers is Lee Buchheit who was a leader in sovereign debt restructuring in the 1980s and 1990s and is currently representing Iceland in the Icesave dispute with the Dutch and UK governments.

Reminder:  Bob Aliber talk on financial crises in TCD tomorrow Friday, 12.30-2, Room 3051, Arts Block.

Update:  Aliber seminar will be held in IIIS seminar room, not Room 3051.

Eichengreen and Gros on Greece

Barry Eichengreen writes about the Greek situation at Eurointelligence: you can read it here.

Daniel Gros has an FT comment here.

Both emphasise that the main challenge now is for Greece to undertake a very sizeable fiscal adjustment.

Update: The Economist has a nice article on the Greek situation here.