The latest European Commission staff review of the EU/IMF programme is here.
Archive for the ‘Uncategorized’ Category
By Philip LaneFriday, December 13th, 2013
This Reuters/NYT article highlights the role of NTMA roadshows in the return to market access - here.
Yesterday’s Irish Times covered an appearance by the Minster for Finance at Bloomberg with ‘Noonan vows to end cycle of boom-and-bust economics’.
A recording of the short address given and the subsequent Q&A session is available here.
By Philip LaneWednesday, December 4th, 2013
By Philip LaneMonday, December 2nd, 2013
By Philip LaneMonday, December 2nd, 2013
By Philip LaneFriday, November 29th, 2013
This open letter has been published in full-page ads in the main international financial newspapers this week.
The latest update of the mortgage arrears statistics has been published by the Central Bank. See here.
For the first time since the series began the total number of PDH accounts in arrears shows a quarterly fall (142,892 to 141,520). This is a result of the slow-down in new arrears cases seen in recent quarters. The situation of those in existing arrears continues to deteriorate with another significant increase in the number now 720 days or more in arrears (28,860 to 31,834).
The outstanding balance on mortgages in arrears is €25.6 billion, of which €18.9 billion are in arrears of 90 days or more. The total amount of arrears rose from €2.02 billion to €2.17 billion.
The total amount of PDH mortgage debt continues to fall and is now at €108.5 billion, compared to €118.6 billion when the series began in September 2009. Capital repayments on existing loans are offset by new lending so the rate of capital repayment over the past four years has been substantial.
Interest-only or other reduced payment options remain the most utilised restructuring options though the number of accounts these were applied to fell from 44,805 to 37,643 over the quarter. In relation to the overall drop in the number of PDH mortgage accounts in arrears it should be noted that restructuring through arrears capitalisation increased from 13,627 to 16,146 accounts.
In the Q2 data it was reported that there was 254 permanent interest rate reductions for PDH accounts. Today’s release says that just 16 accounts now have a permanent interest rate reduction applied to them. The number counted as having a temporary interest rate reduction increased from 870 to 1,426.
The number of split mortgages rose significantly from 306 to 1,154 over the quarter. Term extensions remain the most used permanent restructure increasing from 14,630 to 15,447.
There are now 6,325 in ‘Other’ restructures (up from 2,300 in Q2). This category “mainly comprises accounts that have been offered a long-term solution, pending the completion of six months of successful payments.” Many of these are likely to be split mortgages agreed during the quarter which will move into that category on successful completion of the probation.
At the of September there were 80,555 restructured PDH accounts and 78.9 per cent were deemed to be meeting the conditions of the restructure. There were 76 forced repossession in the quarter and 133 voluntary surrenders.
Data on the Buy-to-Let sector is also included in the release.
By Aedín DorisWednesday, November 27th, 2013
Donal O’Neill, Olive Sweetman and I have been working on the issue of wage flexibility in Ireland, and have put our initial results into a working paper. Here’s the abstract:
There is considerable debate about the role of wage rigidity in explaining unemployment. Despite a large body of empirical work, no consensus has emerged on the extent of wage rigidity. Previous attempts to empirically examine wage rigidity have been hampered by small samples and measurement error. In this paper we examine nominal wage flexibility in Ireland both in the build up to, and during the Great Recession. The Irish case is particularly interesting because it has been one of the countries most affected by the crisis. Our main analysis is based on earnings data for the entire population of workers in Ireland taken from tax returns, which are free of reporting error. We find a substantial degree of downward wage flexibility in the pre-crisis period. We also observe a significant change in wage dynamics since the crisis began; the proportion of workers receiving wage cuts more than doubled and the proportion receiving wage freezes increased substantially. However, there is considerable heterogeneity in wage changes, with a significant proportion of workers continuing to receive pay rises at the same time as other were receiving pay cuts.
The full paper is linked here.
By Philip LaneTuesday, November 19th, 2013
The FT reports on capital market perspectives in relation to Ireland’s “clean exit” - here.
In an interview broadcast today as part of RTE’s This Week show, NTMA chief executive John Corrigan made some comments on the OMT programme.
Colm Ó Mongáin: If we had applied for extra conditionality we would have qualified then for this European Central Bank bond-buying programme so was there any sense that applying for a credit line would offset the risk that were there trouble further down the line and a spike in European bond yields we would be ok because the European Central Bank would be able to buy Irish bonds?
John Corrigan: Well, the take on that is … is unclear in the sense that the OMT, which is the jargon for it, which is the programme operated by the central bank, which hasn’t been triggered yet, the precise terms and conditions for accessing that haven’t been laid down, number one. And number two, that programme is designed to address systemic issues which might arise in the markets. So, if, even still we were caught up in systemic issues as part of a wider problem to the extent that OMT was triggered we would still be in line to benefit from that.
Most of the ‘what if’ scenarios raised this week following the decision not to pursue a precautionary credit line focussed on domestic concerns about the Irish economy rather than systemic ones for the euro area.
The question seemed a perfect opportunity for John Corrigan to say that Ireland is already eligible to be considered for OMT without the necessity for the additional conditionality that a precautionary credit line might bring. He is right that “the precise terms and conditions haven’t been laid down” but we do have this very brief outline of OMT which provides some guidance on which countries are eligible to be considered for OMT.
Outright Monetary Transactions will be considered for future cases of EFSF/ESM macroeconomic adjustment programmes or precautionary programmes as specified above. They may also be considered for Member States currently under a macroeconomic adjustment programme when they will be regaining bond market access.
It is pretty obvious that Ireland is covered by the second sentence. As part of the existent EU/IMF programme there has already been strict conditionality imposed on Irish policy for 2014. If there is an asymmetric shock that hits Ireland which can be alleviated by central bank bond purchases then the ECB’s Governing Council can decide to activate OMT for Ireland. This week’s decision had no impact on that.
As long as Ireland is “regaining bond market access” (which is admittedly subjective) then Ireland is eligible to be considered for OMT and a credit line is not a necessity for it. It is not clear to me why John Corrigan did not say as much today.
By Philip LaneFriday, November 15th, 2013
Transcript and video link at Broadsheet - here.
By Philip LaneThursday, November 14th, 2013
This FT article covers a lot of ground - here.
By Philip LaneThursday, November 7th, 2013
The opening address at the Irish Labour History Society Annual Conference delivered by Minister for Social Protection Joan Burton is available here.
The CSO have published the Statistical Yearbook of Ireland 2013. The 20 chapters provide a useful compilation of the broad range of measures produced by the CSO. The naming of Chapter Nine suggests we have a way to go before we “break the vicious cycle”!
The CSO have also issued the October update of the Live Register which continues to show a decline. In the SA series it can be seen that most of this drop has been among males.
Separately, Eurostat have published updates for unemployment and inflation. In September, Euroarea unemployment remained at 12.2%, while the flash estimate of October HICP inflation shows a drop to 0.7%.
By Colin ScottWednesday, October 30th, 2013
UCD Sutherland School of Law is hosting a morning seminar in the IFSC, 14th November, 8-10.30am, on opportunities and challenges for Ireland’s financial services sector. Justin O’Brien, Visiting Professor at UCD Sutherland School of Law, will address key issues facing Ireland’s financial services sector including, regulatory engagement – problems and perspectives, regulating culture – the rationale for intervention and nurturing a world-class regulatory environment in Dublin. Justin O’Brien is a Professor and Director of the Centre for Law, Markets & Regulation in the University of New South Wales. He has written many books on the subject including his most recently published Integrity, Risk and Accountability in Capital Markets – Regulating Culture (Hart Publishing, Oxford, 2013), Engineering a Financial Bloodbath (London: Imperial College Press, 2009) and Redesigning Financial Regulation: The Politics of Enforcement (Chichester: Wiley, 2007). Details and bookings at http://www.ucd.ie/law/events/title,187039,en.html
UCD’s Dr Niamh Hardiman, funded by IRC, has organised a conference on The Political Economy of the European Periphery in Newman House, 85 St. Stephen’s Green, Dublin, on Tuesday 3 December 2013. Registration is free, but places are limited so please book by email to email@example.com, with the subject line ‘European Integration’, before Tuesday 26 November 2013.
The full programme is here (.pdf).
By John McHaleMonday, October 28th, 2013
Paul Krugman has provided a new paper and post on the effects of a “sudden stop” of capital inflows in a country with a floating exchange rate and constrained by the zero lower bound on the short-term interest rate. In previous posts (see here and here), Paul made two claims: (i) that a government operating an independent monetary policy should be able prevent a loss of creditworthiness; and (ii) that even if that loss did occur its effect would be expansionary through a depreciation of the exchange rate.
He sets out the two issues in the introduction to the new paper:
What I want to talk about instead is a question that some of us have been asking with growing frequency over the last couple of years: Are Greek-type crises likely or even possible for countries that, unlike Greece and other European debtors, retain their own currencies, borrow in those currencies, and let their exchange rates float?
What I will argue is that the answer is “no” – in fact, no on two levels. First, countries that retain their own currencies are less vulnerable to sudden losses of confidence than members of a monetary union – a point effectively made by Paul De Grauwe (2011). Beyond that, however, even if a sudden loss of confidence does take place, countries that have their own currencies and borrow in those currencies are simply not vulnerable to the kind of crisis so widely envisaged. Remarkably, nobody seems to have laid out exactly how a Greek-style crisis is supposed to happen in a country like Britain, the United States, or Japan – and I don’t believe that there is any plausible mechanism for such a crisis.
I think a lot of people, for differing reasons, found the second claim too good to be true (although I don’t think anyone has in mind quite a Greek-style crisis). In a couple of earlier posts (here and here) I suggested one contractionary force: a loss of government creditworthiness could impair balance sheets in the banking system.
In the new paper, which contains some really nice new modelling, Paul attempts to dispose of various objections to the claim that a creditworthiness shock would be expansionary. (And for the record I am a big Krugman fan.) Here is what writes on the banking channel:
Several commentators – for example, Rogoff (2013) — have suggested that a sudden stop of capital inflows provoked by concerns over sovereign debt would inevitably lead to a banking crisis, and that this crisis would dominate any positive effects from currency depreciation. If correct, this would certainly undermine the optimism I have expressed about how such a scenario would play out.
The question we need to ask here is why, exactly, we should believe that a sudden stop leads to a banking crisis. The argument seems to be that banks would take large losses on their holdings of government bonds. But why, exactly? A country that borrows in its own currency can’t be forced into default, and we’ve just seen that it can’t even be forced to raise interest rates. So there is no reason the domestic-currency value of the country’s bonds should plunge.
But this response essentially just invokes point (i) – that the government with an independent monetary policy won’t lose creditworthiness. As far as I can see, it does not deal with the second part of claim that the loss of creditworthiness would actually be expansionary even with adverse effects on the financial system at all. The problem actually comes out more clearly in the original formulation of Paul’s model, where it is explicitly assumed there is a rise in the risk premium – and presumably a reduction in the market value of outstanding government bonds – and it is shown that the effect is expansionary.
It still seems to me that to dispense with the banking-related objection Paul needs to argue either theoretically or empirically that this particular contractionary force is not relevant. On the empirical side, the interesting case studies that he looks at do not isolate an answer to the second claim.
Finally, it is worth considering a simple thought experiment. Imagine that in the recent imbroglio over the debt ceiling, a solution wasn’t reached and the US government was forced to (temporarily?) default on its debt. Thinking back to the post-Lehman experience, I don’t think it is hard to imagine that this would be extremely disruptive to the US financial system, notwithstanding a depreciation of the dollar, in ways that would be difficult for the Fed to fully counter in both the banking and shadow-banking systems.
By Philip LaneThursday, October 24th, 2013
The WSJ has a detailed report on the current state of negotiations - here.
By Philip LaneWednesday, October 23rd, 2013
By Philip LaneSunday, October 20th, 2013
The NYT has a profile of Ignazio Angeloni, a senior ECB official who is closely involved in the new SSM process: it is here.
By John McHaleFriday, October 18th, 2013
Simon has an interesting post on the EU measurement of output gaps and structural budget balances. See: here.
A final reminder that this year the DEW, kindly sponsored by Dublin’s Chamber of Commerce, will be held at the CastleTroy Park Hotel in Limerick from 18-20 of October. The final programme is here.
All bookings and reservations for the conference should be directed here.
The 36th DEW Annual conference will see more than 30 presenters, with Ministers Michael Noonan and Pat Rabbitte giving plenary talks, along with policy makers, academics, and members of the business community, it’s going to be a lively debate. See you there.
By Philip LaneWednesday, October 16th, 2013
The NYT reports here.