Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

Richard Tol leaves the ESRI

And he’s not gone quietly. Richard is leaving to take up a position at the University of Sussex, and I wish him well. Moving country when one has young kids is no joke. One doesn’t do these things lightly. Richard has made some important points in relation to Irish public policy on Twitter, in relation to the ESRI and the Irish economy in the Irish Times, and a bit of both today on the News at One (link is to .mp3, about 3:40 in). These are worth highlighting for three reasons.

1. Richard has criticized the independence of the ESRI with respect to its funding sources and the conclusions of its research, especially in areas away from their sometimes trenchant criticism of the Department of Finance. This is a serious matter which deserves some comment by the ESRI in my opinion.

2. Richard now joins 6 or 7 senior academic economists, including world leaders in their fields like Profs Kevin O’Rourke and Liam Delaney, leaving Ireland for more or less the same reason–they see a decade of austerity ahead for Ireland, they feel Irish academia has less to offer them as a result, and because they are research active and employable elsewhere, they are going. This is a problem for Irish academic economics going forward.

3. Most importantly, I think, Richard is a dissenter in many areas of Irish public policy and public life. He has his opinions which, while we don’t have to agree with them all (I certainly don’t), should be respected and given an airing. The fact that he didn’t find a home to adequately voice these opinions is a shame, and something I think we are poorer for as a result.

Dutch Bankers’ Bonuses Go Bye-Bye, Thanks to Twitter

One thing journalists from other countries ask quite frequently is why there haven’t been more riots or other expressions of collective anger in Ireland, given the scale of the problems we’ve faced and the sheer injustice of some of the actions taken since all of this began in 2007. I always answer that I have no idea why we haven’t seen more grass roots reactions like Bondwatch Ireland. I really don’t know.

Last March in Holland we had an example of twitter-inspired social unrest leading to the reversal of bonuses being paid out. This is the first I’ve seen of it, so I thought I’d blog it.

From the piece:

ING customers mobilised on Twitter and other social networks to protest at bonuses paid to bosses at the bank, one of the biggest in the country. The threat of direct action raised the spectre of a partial run on ING, terrifying the Dutch establishment. Fred Polhout, union organiser at the bank, says: “People were outraged. We heard about the bloated sums being paid again in the City and in New York; but suddenly the issue exploded on our own front door.”

and:

So severe was the public reaction to Hommen’s bonus that within days he had agreed to waive the award and told other ING directors to do the same.

Fascinating, and perhaps something to watch for in the coming months in an Irish context.

Ireland’s Balance Sheet Recession

I’ve been banging on about Ireland being in a balance sheet recession for some time. Richard Koo’s latest paper in Real World Economic Review (.pdf) has some really interesting charts, including one on Ireland’s balance sheet recession, which I reproduce below.

Koo on Ireland.

McCarthy: Time for a whole new strategy on negotiations

As chairman of the Limerick Branch of the McCarthy fan club, I hereby point you towards yesterday’s Sindo column where The Colm describes a new strategy for negotiating with our overlords cousins in the EU.

From the column:

The reported ECB attitude on Irish debt relief should come as no surprise to anyone. Taking one for the team will not go unpunished in the new European order.

Here’s an alternative negotiating strategy. The key premise is that debt relief cannot be confined to Greece, a centerpiece of the most recent deal in Brussels. This is, of course, a matter of judgement, but it is the judgement of the bond market, the one that matters in the end. The debt relief currently contemplated for Greece is inadequate, so there will be more. Debt relief will be required also for Portugal. If Ireland is to repay its core sovereign debt, there needs to be a deal on sharing the bank-rescue costs. Otherwise, Ireland will either join Greece and Portugal in sovereign default or will be reliant on official lenders indefinitely.

It follows that the number of European sovereign defaults can, with luck, be confined to two, but only with a deal on sharing some of the Irish bank-rescue costs with those who insisted that they be incurred.

Three questions immediately present themselves:

  1. Is this strategy realistic? Assuming it is, then:
  2. Assuming we adopt the strategy, how will our EU cousins react?
  3. Will the outcome in terms of debt sustainability be better or worse under the new strategy if it is successfully carried out?

Deleveraging in the Eurozone

Vincent O’Sullivan and I have some thoughts on the issue for VoxEU here.