The Irish Economy

The IMF has released three major studies on the fiscal situation in advanced economies.

The summary is here, while the papers are available at:

• Long-Term Trends in Public Finances in the G-7 Economies

• Default in Today’s Advanced Economies: Unnecessary, Undesirable, and Unlikely

• Fiscal Space

I’m constantly surprised by the naivety of opponents of Ricardian Equivalence.  There are indeed many reasons why it may not hold. Some of these have already been mentioned in a previous post.  I can add another to the list: hyperbolic discounting. 

In addition, the difficulties associated with econometrically testing the proposition are almost intractable, mainly because of endogeneity considerations.  What is certain is the near impossibility of isolating a particular policy episode and conclusively asserting that it does or does not amount to an expansionary fiscal contraction.

Nevertheless, none of the arguments against Ricardian Equivalence are sufficient to enable us to conclude that there is no tax discounting whatsoever.  Such a view cannot provide “a valuable theoretical baseline”.   The same remark applies to policy.   Otherwise, the sort of spiralling sovereign debt burden, which Ireland is currently experiencing because of the bank bailout, would have no welfare implications because it would not affect private behaviour.

In this guest post, Frank Convery responds to the various comments made on this blog over the past few days and the initial post by Richard Tol:

Holbrooke Shields and others re Censorship

‘Is Comhar SDC practicing a form of censorship by not publishing Richard Tol’s comment

Response

Tol’s comment was received on Friday 20th at 11:47, and it was posted Monday 23 at 09:59, as were the comments by Holbrooke and Lucey which were submitted on Saturday 21st . The delay was a product of the fact all comments have to go through an administrator because a huge amount of spam comes through, and the office is not staffed over the week end.

Conclusion

Discussion is appreciated and welcome. Keep paranoia at bay if there is a delay in posting. We’ll check out the management of Irisheconomy.ie to see if turnaround can be improved.

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Economic and Social Review has been accepted by Thomson Reuters for re-inclusion in the Social Science Citation Index (hence Web of Science).

We should  be  indebted to the work of Niamh Brennan, Programme Manager, Research Information Systems & Services, Trinity College Library Dublin, for her work that showed the citation and publication record of the Journal, during its time in exile, to be of the international standards required by Thomson Reuters.

I personally enjoy writing, teaching and publishing on Ireland.  Work on Ireland published in the ESR was beginning to be seen as not internationally recognized. Hence we saw promotion boards in Irish Universities not counting the publication, yet it was counted in the research assessment exercise in the UK.  This creates poor incentives for scholars to work on Ireland, when in reality it provides extremely fertile ground for economic and social research.

As shown by Lucy and Barrett (2003), the ESR since 1970 has mainly published papers by those that were also publishing in the best Journals in their field, Neary, Honohan, Lane and Whelan, to name a few.  Lane and Whelan also edited the journal when it out of the Web of Science. The ESR is an important outlet for Economic and Social research on Ireland. Hopefully, the economics community will now promote it and build up its citation record to become a leading economic journal.  The researchers in Ireland are as good as those in Australia, Canada and the UK but we are seriously disadvantaged by not having top “home” journals promoted on good digital platforms such as the Web of Science.  

Well done Niamh, Editors and Contributors

Alan Barrett and Brian Lucey  (2003). “An Analysis of the Journal Article Output of Irish-based Economists, 1970 to 2001,” The Economic and Social Review, Economic and Social Studies, vol. 34(2), pages 109-143

The President of the High Court, Justice Nicholas Kearns, has established a working group to explore the alternatives to Ireland’s system of lump-sum compensation for accident victims. The group is headed by another judge of the High Court, Justice John Quirke, and has been asked to report by end-year.

The lump-sum system has been modified across the water, where the courts can award recurring payments, in practice index-linked annuities, with or without the agreement of the parties. I argue in the paper below that we should consider following suit in this country.

 http://www.ucd.ie/t4cms/wp10_23.pdf

Teagasc colleagues have produced their mid-year assessment of the likely outturn for output and incomes in Irish agriculture in 2010. The main message is that there is a solid recovery in gross margins in dairy and cereals from the awful year in 2009 and also a positive outlook for sheep (helped by the recent announcement of support under the new Grassland Sheep Scheme), but no change is expected on cattle farms where low or negative profitability will continue.  Overall, the Teagasc assessment is that both total agricultural output and incomes should increase by around €300 million this year, which will be an increase of 18% on the operating surplus in agriculture in 2009. (more…)

Is this really a moral victory for Ireland or is it once again just “the cracked looking-glass of a servant”?

A collection of researchers at the National Institute of Regional and Spatial Analysis (NIRSA), R. Kitchen, J. Gleeson, K. Keaveney, and C. O’ Callaghan, have written a powerful new report on Irish property market policy and land development planning policy, critically examining both policy errors during the 1993-2007 period, during the post-crash period post 2007 (including a critique of NAMA) and making suggestions for the future.  The link is here.

The report has a modern geographers’ perspective and is strongest when discussing zoning policy, development policy, and property-related tax policies, but there is still plenty of things for mainstream economics comments/discussion in the report.

The report makes clear to what a large extent post-1993 property-related government policy, right up until today, is driven by the interests of the property development industry.  Coincidentally (or not) this industry is one of the biggest funders of the dominant party in government during this long period.

I am not sure if I am the correct person to paste up this link, but perhaps others can provide useful comments and replies to comments.  (I do not claim to be a property researcher but to the extent that property is a risky portfolio asset it touches a little bit on my own research area.)

The recently published NCC study on the costs of doing business in Ireland can be found here.

The newly released stress test of selected EU-area banks by the Committee of European Bank Supervisors (CEBS) is flawed in its methodology and the results are not a reliable indicator of EU bank sector soundness. A stress test should examine the impact on net portfolio value of extreme but plausible shocks to the key variates explaining net portfolio value.  The CEBS report states proudly and repeatedly that it uses extreme but plausible shocks, and this is true, but it ignores the key-variates criterion of a well-designed stress test.

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A while ago, I pointed out on this site that a season ticket to Shamrock Rovers offered remarkably good value for money. Any of you who acted on my advice will now be in the happy position of being able to buy tickets for the Juventus game on Thursday.

Just saying.

Agustín Bénétrix, Barry Eichengreen and I have a piece over at Vox looking at the end of house price collapses. Historical patterns don’t suggest that Irish residential prices will stop falling any time soon; the best way to ensure that they do is to let them adjust downwards as speedily as possible.

Update: in light of a recent article in the Sunday Tribune, I should clarify that nowhere in the Vox piece do we present estimates of the extent to which house prices will decline in Ireland. When asked by the journalist in question how far they would have to fall, I replied that I agreed with Morgan Kelly’s analysis, or words to that effect. When pressed as to what that meant, I gave the figure mentioned in the Sunday Tribune. I am always happy to cite and give credit to Morgan’s work in this area, but I am not happy to be presented as an independent source of analysis on the subject, much less to be described as a “leading housing researcher”.

There. That feels better.

One of the themes in the discussion about the Poolbeg incinerator is that it is perfectly in line with the official waste policy of the Department of the Environment while being firmly opposed by the Minister of the Environment. The Minister has now submitted a new Statement of Waste Policy for consultation.

The Statement is rather short, 26 pages (with only 13 pages devoted to policy measures), and not very specific in most places and often ambiguous if not muddled. Presumably, this means that the new waste policy is still some years into the future, and may not be ready during the term of the 30th Dail Eireann.

The Statement is firmly based on the Eunomia report, and does not even acknowledge the existence of the Gorecki report.

The first four policy measures aim to strengthen the role of the state, the counties, and the private sector (at whose expense, one wonders); to decrease costs and increase quality (always a great plan); and to achieve cost-efficacy by imposing additional constraints (a mathematical nonsense).

There is a proposal for the separate collection of six, perhaps seven streams of household waste: clothes and perhaps glass would collected at the kerbside (in lieu of the current bring banks); paper, aluminum, and plastic would be separated at sources (instead of mixed); and brown bins (for food waste) would be rolled out nationwide.

There is to be an arbitrary cap on residual waste (black bins), with financial penalties for counties that do not meet these targets (on average). County councils may respond by tacitly encouraging people to stuff their waste in green, brown, yellow, red, blue and purple bins instead. (There will be a tax credit cq supplemental benefit for the colourblind.)

The Statement reiterates the plan to raise landfill levies by 150% between now and 2012. As there is an EU-imposed cap on landfill, a system of tradeable permits would have been a better choice of instrument.

The Statement invokes the polluter pays principle and calls for an (unspecified) incineration levy that is unrelated to its emissions. There will be another attempt to declare incineration ash to be hazardous waste (it is not). In a separate proposal, there will be an arbitrary cap on incineration.

There will be arbitrary targets for recycling, but no policies to ensure that these are met.

Producers will carry a greater share of the cost of waste management. Newspapers and magazines are mentioned as an example.

There will be an awareness campaign to convince people to waste less.

And plenty of jobs will be created, innovation stimulated, and we will all become terribly rich.

On the one hand, the proposal is an improvement as the Minister now follows the proper procedures of a parliamentary democracy, and some of the hare-brained ideas in the international review have been dropped. On the other hand, the Statement itself is weak. Little thought has gone into costs, incentives and practicalities. The Statement strictly follows the green dogma of the waste hierarchy, a lexicographic ordering of options for waste disposal.

There is also an opportunity missed. The current Irish waste policy is sound (at least on paper). The main exception is household waste collection, with duplication of services and private operators competing with public operators-cum-regulators. The International Review recommended that this be replaced with a system of auctioned concessions, one of the few recommendations that it shared with the Gorecki report. The Statement did not adopt this recommendation, offering only vague language.

Karl Whelan has posted on this question, querying the non-removal of Anglo management after the guarantee at end-September 2008. One rather strange manouevre has been commented on by Cliff Taylor in the Sunday Business Post (I can’t locate the piece: Cliff writes a lot, for an editor).

What appears to have happened is this. In May 2008, Anglo borrowed in Yen to finance an asset position in £ Sterling, and ran the position uncovered. There was some tax angle. Yen interest rates were well below sterling rates. By end-September, the Yen/Sterling exchange rate had moved adversely but not disastrously. But the movement accelerated and the deal was unwound at substantial cost a few months later. The following is from Anglo’s 2009 accounts, page 62.

Included within foreign exchange contracts is the impact of a non-trading Japanese Yen financing arrangement, which was first

entered into in May 2008 and ended during December 2008 and January 2009. The financing arrangement was intended to

reduce the Group’s overall net cost of funding and was structured in a manner which was anticipated to result in no net after

tax loss for the Group arising from currency fluctuations. In the six months to 31 March 2009 the arrangement resulted in a pretax

loss of €181m but an after tax benefit of €17m. However, due to the significant operating losses incurred by the Group in

the nine months to 31 December 2009, €97m of taxation benefit has not been recognised resulting in a pre-tax loss for the

fifteen month period to 31 December 2009 of €181m (30 September 2008: €31m) and an after tax cost of €80m

(30 September 2008: gain of €6m). The potential benefit of these losses carried forward is a component of unrecognised

deferred tax assets in note 35.

Not being an accountant, I am unable to translate this into English, but it looks like an uncovered foreign exchange carry-trade punt that went wrong. Of the €181m hit, €150m occurred after end-September 2008, at which point there could have been no plausible expectation of profits to shelter, assuming that the tax angle is, or was, serious. Thus Anglo would appear to have run a naked forex position post the guarantee, and dropped €150 m in the process. No doubt there is a more detailed explanation to be given, but it sure looks like gambling for redemption. On October 5th. 2008, I wrote the following in a piece in the SBP:

  ’All six of the domestic banks have been given an identical vote of confidence and none has been allowed to fail. This is both unjust and potentially costly, since any bank close to insolvency now has an incentive to throw more dice, without capital at risk’.

The Commission of Inquiry will have a long agenda, but this costly Anglo forex manouevre deserves a slot somewhere.

Day 2 of the new NAMA business plan and I’m sure people are already a little tired of it as tolerance for all things NAMA has dwindled for most of us. For those still interested, Constantin Gurdgiev has a number of useful calculations in this post.

I’ll conclude on this issue for now by making a few simple points as to why I think the outcome for the taxpayer is likely to be worse than indicated by the plan’s “worst-case scenario’’ of an €800 million loss to be recouped via a levy. (more…)

You might remember that a few months ago, NAMA CEO Brendan McDonagh appeared before the Oireachtas Finance Committee and told them that one third of NAMA’s assets are cashflow producing. I noted at the time (based on the information in bank annual reports) that this didn’t seem to me to be correct, with the likely figure being a good bit lower. Now, the media are leaking details of NAMA’s new and improved business plan and we are being told that “only about 20 per cent of the loans are generating any income, that is repayments or interest payments.”

This raises an interesting question: Was Mister McDonagh misinformed in April when he said that one-third of the loans were cashflow producing or have 13 percent of the loans stopped producing income between April and July? Neither answer is particularly palatable.

As for “In a worst-case scenario, Nama could end up losing several hundred million euro” one really has to wonder do the people who put this plan together know what a worst-case scenario means.  However, coming from the folks who brought us the 80% full recovery scenario, I suppose we shouldn’t be surprised.

Towards the end of a recent essay in The New York Review of Books (’The Time We Have Is Growing Short’) Paul Volcker has some interesting remarks to make about the Irish economic situation.

This guest blog is by Mick Moran, WJM MacKenzie Professor  of Government, University of Manchester and is an edited text of the keynote address to the Biennial Conference of the European Consortium for Political Research Standing Group on Regulatory Governance,  and was presented at University College Dublin, 18 June 2010.

Regulation and the Financial Crisis

The mess we are in.

Four quotations aptly summarise the mess we are in, and the way we got there.

‘Complex financial instruments have been especial contributors, particularly over the past couple of stressful years, to the development of a far more flexible, efficient, and resilient financial system than existed just a quarter-century ago.’ (Alan Greenspan 2002)

‘In addressing the challenges and risks that financial innovation may create, we should also always keep in view the enormous economic benefits that flow from a healthy and innovative financial sector. The increasing sophistication and depth of financial markets promote economic growth by allocating capital where it is most productive. And the dispersion of risk more broadly across the financial system has, thus far, increased the resilience of the system and the economy to shocks’ (Ben Bernanke May 2007)

‘the current economic situation is better than what we have experienced in years. Our central forecast remains quite benign: In line with recent trends, sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.’ (OECD Economic Outlook 2007)

These first three quotations sum up ‘the Great Complacency’ -  the delusion that led so many economists and economic policy makers to announce that the last bubble was ‘the Great Moderation’ – a new utopian age when all the fundamental problems of a market economy had been solved.

And the fourth quotation sums up the sort of intellectual mess that the financial crash left behind.  Buiter puts it with characteristic Dutch bluntness:

‘The Bank of England in 2007 faced the onset of the credit crunch with too much Robert Lucas, Michael Woodford and Robert Merton in its intellectual cupboard.  A drastic but chaotic re-education took place and is continuing.’ (Wilhem Buiter 2009).

What went wrong with economic understanding? 

 The problems with the discipline of economics are surely threefold:

·        It became corporatised: both as to education (especially in the Business Schools) and in practice (economists in financial institutions).  The economist in the study was transformed into the economist broadcasting from the dealing room, laying down the law about what markets would and would not tolerate.

·        It became organised into a conventional academic hierarchy.  What we can learn from the recent fate of economics is that the worst thing that can happen to a social science discipline is that it gets  access to a Nobel Prize

·        It became professionalized: it developed a recursive world of professional economics that heightened the danger of succumbing to groupthink.  Algebra is not substitute for observation.

But while economists were cheerleaders during the ‘Great Complacency’ they were not the only culprits. Hardly anybody – not policy makers, not academic students of regulation – foresaw what was coming.  We all have lessons to learn.  Here are three that we must urgently take on board.

Democracy matters: the end of the ‘Great Moderation’ was also the end of  a ‘Great Experiment’ lasting more than 30 years: the experiment was designed to insulate regulation from democratic  politics.  Hence  the rise of central bank independence and the spread of independent regulatory agencies.  We saw the realisation of Majone’s theory of the regulatory state: a theory that asserted that majoritarian democracy could not cope with the complexity of modern market management.  The Great Experiment proved to be a disaster.  It led us to the catastrophe of 2008; and rescuing the financial system was only possible by turning to those despised figures, elected politicians, who it turned out were the only ones able to mobilise the cash and legitimacy to put the financial system on something like an even keel.

Ideology matters: the core of the crisis was due to the naturalisation of markets: an exercise in ideological hegemony that pictured them as subject to quasi-scientific determined laws.  They need to be denaturalised both to understand the crisis and to avert future disaster. Markets are social institutions to be understood by observation not algebra.

Interests matter: Many of our standard notions in explaining regulatory catastrophe – Groupthink, coordination problems – work contingently to explain things – see my opening three quotes.  But why was something like groupthink so prevalent?  It was linked to three developments

1.     The astonishing rise of a new Anglo-American plutocracy in the markets: the era of the Great Moderation was also the greatest era of plutocratic enrichment since the age of the Robber Barons.  But unlike the Robber Barons these new plutocrats did not practice the engineering of steel of railways; they practised the smoke and mirrors of financial engineering.

2.     The fantastic wealth of the financial sector on both sides of the Atlantic bought an equally fantastic amount of lobbying muscle.

3.     This converted into the kind of hegemony that lay behind my opening quotes: the stories of regulation before the crisis – in the UK, in the US, even in a smaller case like Ireland –are of timidity and subordination on the part of public regulators.

We have to fashion a new ideology of public interest regulation, and a new confidence in that regulation: it existed when the American  New Deal institutions found their feet; it must be rediscovered.  And, as the forces of financial power might regroup, it must be rediscovered in the face of the lobbying machines of the financial markets.

David McWilliams mentioned the decline in the Baltic Dry Index in his column last Sunday: there is more on the topic here.

Paul Krugman takes the cases of Ireland and Spain to address this question here.

Paul Krugman has a post this morning pointing out that in a standard Mundell-Fleming model, a fiscal contraction in Europe will have a negative effect on its trading partners in a floating rate environment: it not only lowers total European demand, but also leads to a weakening euro. Now, the latter effect is driven by lower European interest rates, and as Krugman acknowledges this channel won’t be working in a textbook manner in a world where European interest rates are almost (if not quite) at the zero bound; but the euro is indeed weakening as we speak, and Americans are getting worried.

There is broader point here. In a Mundell-Fleming world, with floating exchange rates, fiscal expansion is good for one’s trading partners: it involves a positive externality. Whenever you have positive externalities, there is a risk that not enough of whatever produces those externalities will be provided. Thus, in 2009, when fiscal policy was on the agenda, an important role of international coordination was to ensure that nations not try to free ride off each other’s stimulus packages. Cooperation was relatively easy to sustain: the world economy faced a clear and present danger, and nations benefitted from each other’s programmes.

In 2010 things look very different. Fiscal policy has gone into reverse in several countries, and so the focus will presumably shift to monetary and currency policy. But while fiscal stimulus helps a county’s trading partners, currency depreciation hurts them. (More generally, in a Mundell-Fleming floating rate world, expansionary monetary policy in one country hurts other countries — though again the fact that interest rates are almost at zero complicates the analysis.) So, we have moved from a world where macroeconomic policy involved positive spillovers to one where it is likely to involve negative spillovers — a much more ‘beggar-thy-neighbour’ world.

Expect lots of protectionist rhetoric in the months ahead.

A few weeks ago I posted a link to a presentation put together by Spiegel Online showing the maturity profile of the debt of Ireland and other European sovereigns with high deficits. The exact nature of the calculations for Ireland were questioned at the time in the comments. Last week, I received an email from someone who clarified two points for me in relation to the Irish information in this presentation.

First, the €8.6 billion shown as Irish bonds due this year are almost all Treasury bills even though the chart is labelled “When Irish bonds are due”.  Second, the Spiegel people  selected “Republic of Ireland” as opposed to “Ireland Government Bond” when performing their Bloomberg search. This means that their numbers for future years include, for example, the Dublin Airport Authority and the Housing Finance Agency.

Morgan Kelly has published a downbeat assessment of Ireland’s prospects for debt stabilisation in today’s Irish Times. As part of this, he provides a very powerful indictment of the Irish bank loan guarantee and Anglo bailout.

Frank McDonald at last admits that all is not well in climate land, but fails to find fault with the advocates of climate policy. Anne Jolis is more strident.

There has been a fair amount of discussion on this blog about issues of constitutional reform. Some readers may be interested in a interdisciplinary conference to be held on Friday afternoon, 21st May, at the Clarion Hotel, IFSC which includes contributions from economists, political scientists and lawyers on the question ‘Does Ireland need Constitutional Reform. Programme below and further details from eoin.carolan@ucd.ie.

The UCD Constitutional Studies Group presents a conference on
Does Ireland need constitutional reform?
with the support of the School of Law, UCD.

Clarion Hotel, IFSC
May 21st, 2010.

Conference schedule

Session 1: Why constitutional reform?
1.00pm: An Iterative Constitution: dynamics of a rule-based legal system – Dr. Stephen Kinsella.
1.20pm: Re-placing the Constitution in the context of reform – Dr. Maria Cahill.
1.40pm: The problems of public understanding and constitutional reform – Dr. Oran Doyle.
2.00pm: Questions and discussion.

Session 2: Electoral and parliamentary reform
2.20pm: Reforming the Seanad – Senator Ivana Bacik.
2. 40pm: Is electoral reform the wrong answer to the right question? – Prof. David Farrell.
3.00pm: “Relaying the playing field - Implications of political reform for the constitutional law ground rules of political competition – Dr. John O’Dowd.
3.20pm: Questions and discussion.

3.45pm: Coffee break.

Session 3: Improving public governance
4.00pm: Sacred spaces and blurred boundaries: Administrative reform and constitutional governance – Muiris MacCarthaigh.
4.20pm: Enhancing government accountability to the Oireachtas – Eoin O’Malley
4.40pm: An accountability branch of government? – Dr. Eoin Carolan
5.00pm: The place of the media in the constitution – Dr. Carol Coulter.
5.20pm: Questions and discussion.

5.45pm: Close of conference.

Here’s an interesting report on the Irish residential property market prepared by Karl Deeter’s Irish Mortgage Brokers in association with PropertyWeek.ie & Frank Quinn (Senior College Dun Laoghaire). Its conclusion: “residential investment property is overvalued currently by an average of 37% in Dublin, 43% in Cork, and 39% in Galway.”

The current issue of the New Yorker has a profile of Esther Duflo.  In the article, the views of Angus Deaton on the limitations of randomised controlled trials are assessed as wondering if “someone put sand in Angus’s toothpaste”.  Readers will find the offending substance here. 

You will undoubtedly  make your own assessment of the following direct quote from Duflo in the New Yorker piece:  “I want a baby goat” she mused.  “I’ll take good care of it”.

There is still one day left to late-register for the upcoming conference, “Regulating Financial Market Liquidity and Stability,” taking place tomorrow, Friday, May 14^th , 5 pm – 7 pm, at the Irish Institute of Bankers in the IFSC.  The recent chaotic response of EU policymakers to the Greek debt crisis highlights the importance of the conference’s theme. 

REGISTRATION: The event is free, but delegates must pre-register by emailing Irene Moore (irene.moore@ucd.ie), by the end of the day today (Thursday 13^th May).

Registration begins at 4:45 p.m. and the talks begin promptly at 5 p.m. (You must register and pick up a name tag in order to enter the Institute of Bankers hall.)  

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There are a variety of perspectives on the EU bailout of Greek sovereigns, but from the perspective of an academic economist (at least this one) the proposed bailout has some potential flaws that are quite fundamental.

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The government have finally announced the details of their National Solidarity Bond mentioned in the last budget and previously recommended by ICTU and Fine Gael. The brochure is here. The bonds will pay an interest coupon subject to DIRT of 1% per year and then have a final tax-free balloon payment of 40% when the bond matures at ten years. You can get your money out at any time with seven days notice but the tax free lump sum element is much smaller in this case. Held to maturity, the bond has an after tax Annual Equivalent Return of 3.96%.

On the face of it, the initiative is a bit puzzling. This after-tax rate of interest is lower than the current yield on ten-year government bonds, which is now at 5.2%. However, this scheme will most likely move money out of domestic bank savings accounts (at a time when they really need them) and the government will then be forgoing the DIRT tax that these funds would have paid on the interest payments from those accounts.

For example, if the alternative investment strategy was to obtain a 4% rate for a similar long term savings account, then with DIRT at 25%, the government would be foregoing 1% per year in tax payments. This would bring the real net cost of this scheme to 4.96% per year. Add in the additional administrative cost of dealing with lots of small investors and this doesn’t seem to be a particularly cheap source of borrowing.

In addition, the NTMA already offers a range of products aimed at small investors that carry slightly lower rates with maturities of three or five years. The Solidarnosc bond offers a higher AER in return for tying up your money for a longer period. It seems more like a term premium than national solidarity.

I suspect, however, that my behavioural friends out there will tell me that the existence of a bond with a catchy name like this will uncover a large previously untapped source of funds for the government. Perhaps. I guess we’ll find out. Alternatively, a simple advertising campaign to inform the public about the existence of state savings schemes may have worked just as well.

Finally, I’d note that I don’t agree with Fine Gael’s Simon Coveney that the proceeds from this bond should be ring-fenced for infrastructural projects. Money is fungible. The fact that some money is raised from a new source with a catchy name shouldn’t in any way change the processes used to assess which types of public spending should be prioritised.