The Financial Regulator, Matthew Elderfield, received a clamour of popular support recently when he publicly objected to the Irish domestic banks planned decision not to decrease variable mortgage rates in response to the ECB cut in interest rates. The political establishment was warmly enthusiastic for Elderfield’s intervention. The government used its shareholding and political muscle to ensure that the banks’ decisions were reversed. The government also offered to provide the financial regulator with legislative power to determine banks’ mortgage rates. Wiser heads within the Central Bank prevailed, and the government was told by the Central Bank “thanks, but no thanks” for the offer of new legal power to set retail mortgage rates.
Category: Bailout
The Eurocrats are anxious not to waste the current debt crisis. In today’s Financial Times, Manfred Schepers of the European Bank for Reconstruction and Development proposes not one, but two new EU institutions, to be staffed by transfers from the senior civil services of member states, and promotions within the Brussels/Frankfurt bureaucracies. There will be a new European Monetary Fund, taking on the roles of the International Monetary Fund managing troubled sovereigns, but working on a permanent rather than temporary basis within the Eurozone. Then there will be a new European Debt Agency, managing debt issuance and deficit control for all member states. At a minimum, Schepers’ proposal will aid the Brussels and/or Frankfurt commercial real estate markets, since these bodies will need a lot of office space.
Schepers is keen to retain the ECB’s restricted mandate as a central bank without the ability to engage in quantitative easing, restricting its work to commercial bank liquidity provision and inflation control. He holds this view despite the growing evidence that this central bank design does not work, and the alternative, more flexible mandate of e.g., the Bank of England and US Federal Reserve, does work.
Much more sensible are the views (via a skype video) of Jeff Sachs suggesting that the IMF, together with a reformed ECB acting as a lender of last resort, be brought in to restore stability and confidence to the Eurozone, in the interests both of Europe and the world economy. We also get a glimpse of Professor Sachs’ chi-chi Manhattan kitchen in the background of the video.
Colm McCarthy and many other commentators want the ECB to print euros to whatever extent is necessary in order to keep essentially-solvent Euro states from being unable to finance their deficits. Colm argues that this ECB-provided unlimited funding back-up can prevent an inefficient coordination-game outcome in which investors flee Euro bond markets … because other investors are doing likewise. Once the unshakeable resolve and money-printing firepower of the ECB is demonstrated clearly, the Euro crisis will diminish, in Colm’s view. Many other commentators, e.g, Gavyn Davies, Mervyn King, numerous Germans, argue that this money-printing solution will just generate an indirect subsidy of wasteful Euro governments by prudent ones, with Euro-wide inflation or eventual ECB capital losses serving as the income-transfer mechanism.
There is some talk in today’s papers of a Eurobond system linked to closer EU control over national finances. The EU’s record for governance of this type of national fiscal oversight is not good, and the core nations are rightly sceptical.
Why not a combination policy? The IMF agrees to run sovereign bailout programmes for any Euro countries as needed, with funding provided via IMF-issued, ECB-purchased bonds. The ECB gets a decent, non-exorbitant yield on all new Euros issued, and the IMF has access to an unlimited supply of Euro funding as needed. The guarantee from the IMF-ECB that Italy, Spain and France could be brought within this bailout process as needed, with no funding limits, would probably eliminate the need to bail them out at all (via the same “good equilibrium” mechanism that Colm suggests). To make it credible this programme would need to be ready to activate as needed without exception. Recalcitrant Euro governments who failed IMF programme criteria would be booted from their bailout programmes in the normal way.
The Irish Times ran a series on water services in Ireland.
The first article is perhaps the most interesting. It leaks the yet-to-be-published report on the water sector by PWC. PWC will apparently be fairly critical of the current system, which nicely fits with the plans by the Minister for a radical overhaul. There will be more investment in water infrastructure. There will be a water regulator. Word on the street has that the Commission for Energy Regulation will have its mandate extended to water (but not to transport). There will be national water utility. Bord Gais, Bord na Mona and the National Roads Authority are bidding to run Irish Water. Only Bord Gais has experience in mass retail.
The piece discusses the transfer of Shannon water to Dublin, but the Minister disappears from the story at that point. I would think that we first want to promote water conservation and fix the leaks.
The piece is silent on the future role of the county councils in water. If Irish Water runs the show, what will happen to the water infrastructure owned by the county councils? What will happen to the civil servants who run this?
Another article wonders what will happen to the private water schemes. Will they be nationalized? Will households with a private well and a septic tank have to pay the water charges? That would be grossly unfair.
The inspection fees for septic tanks are unfair too. Us city folk poo for free — or rather, waste water services are covered from general tax revenues. That is, septic tank owners pay for urban waste water, but city dwellers do not pay for rural waste water.
The second main piece is on drinking water quality, the problems with which are typically overlooked even though they are serious.
The third main article is on water meters. It is summarized in an editorial, and repeats a number of points I made in August. My main concern is the plan for the centralized roll out of water meters. I think that it makes more sense to have people install their own meters and let these meters use the same communication network as the smart electricity and gas meters. See the discussion here.
Conor Pope cites 1000 euro per household per year. I said that. If we maintain the current spending on water (incl. investment), if we keep the business rates for water as they are, and if we exempt those on private schemes from the water charges, then full cost recovery (as required by EU legislation) implies an annual charge of 500 euro per household per year.
The Department of Justice has published a press release indicating that the Legal Services Regulation Bill is to be published within the next few days, having received the approval of cabinet.
Regulatory reform in respect of legal services is a key commitment in theEU/IMF Programme for Financial Support for Ireland. A blueprint for reform, indicated in the financial support programme, was provided by the Competition Authority’s 2006 report on the legal professions. The detailed indications of the content of the Bill in the press release suggest the government has rejected some aspects of the Competition Authority report. Notably the proposal that a new regulator would oversee professional self-regulation (as occurs in England and Wales through the Legal Services Board established in 2009) appears to have given way to a new regulatory body which will have direct responsibility for oversight of the professions.
In addition to the Legal Services Regulatory Authority, two further new public bodies are to be established: an Office of the Legal Costs Adjudicator (who will take on regulatory functions over costs currently administered by the Taxing Master) and a Legal Professions Disciplinary Tribunal which will take over responsibility for addressing complaints of professional misconduct, currently administered by the Bar Council and the Law Society of Ireland.
The central rationale stated for the reforms is the promotion of a more competitive environment for provision of legal services, and this is reflected in proposals to allocate tasks concerning entry to the profession and the education of lawyers to the new Legal Services Regulatory Authority so as to liberalize certain aspects of professional education and end the situation under which the profession is both provider and regulator of legal education.
The establishment of three distinct agencies may be controversial and raises the question whether the variety of functions could be undertaken by a single agency. The press release indicates that the industry will be levied to pay for the new regulatory bodies (as occurs with a number of existing regulatory bodies such as the Broadcasting Authority of Ireland). Comments in the press suggest that the professions are concerned that the power of the minister to appoint members of the Legal Services Regulatory Authority will compromise the professional independence of lawyers. It is actually not unusual to find ministers exercising such powers of appointment (appointments to the Legal Services Board in England and Wales are made by a government minister, the Lord Chancellor). Clearly board members must be appointed by someone and ministers are accountable to parliament for their actions. Even the most independent of actors within the legal system, judges, are appointed by ministers (though this is not uncontroversial).
Certain of the more controversial aspects of potential reform, such as fusing the barristers’ and solicitors’ professions and introducing multi-disciplinary partnerships have been assigned to the new Regulatory Authority for research and consideration rather than be provided for directly in the Bill, according to the press release.