My colleague David Bell has a short paper on how opinion polls and gambling odds are predicting the outcome of the Scottish Referendum. He notes there are a number of potential limitations in using odds as unbiased predictors of outcomes particularly if markets are very thin. There is also obviously a good literature on prediction markets more generally and their relation to the Efficient Markets Hypothesis (see, for example, Robin Hanson’s excellent blogposts on this). With all that in mind, it was tempting to see what odds are available for the next general election in Ireland. One prominent alliteratively named firm has odds for the next general election as being (as of 5pm 29th May): FF/FG coalition 5/6; FG/Lab coalition 7/2; FF/SF coalition 6/1 and so on. This seems pretty consistent with other firms. Would be interested in hearing what people make of this.
Category: Uncategorized
The country is all a-buzz with speculation that, having listened to the voters for the last few weeks, and having applied Sudocrem to all affected areas from the experience of the election itself, the political class will suddenly be able to reverse the process of austerity begun under the previous government. (The process obviously continued, in lock step, by the current one).
The Taoiseach’s call for a review of European policies around bank debt, combined with talk of renewal by Labour following the start of their leadership race, is fuelling this speculation.
The latest ESRI quarterly commentary makes the point that the government’s finances are improving at a slightly faster than expected pace, meaning we may hit the Troika-mandated 3% deficit target without serious adjustments required in the forthcoming budget simply by relying on existing forward momentum and the action of automatic stabilisers. Of course they hedge their bets a bit, but given the importance of the issue I thought I’d quote a bit of the commentary:
The public finances are improving more rapidly than envisaged in the government’s plan. If the forecast in this Commentary proves to be correct, government borrowing in 2015 is likely to come in below the target (3 per cent of GDP) once again, even without the substantial further cuts envisaged for the 2015 Budget. However, in formulating fiscal policy it is best to err on the side of caution to ensure that budgetary targets are met in 2015. Nonetheless, these developments suggest that, after a long period of attrition, we are approaching the end of the very painful period of fiscal adjustment. However, there still remains the possibility of new shocks to the economy.
So does that mean the government can run out and renegotiate, renew, de-re-up on their promises to the Troika? I think the ESRI are saying the promises can be met without additional austerity, with a fair wind.
This may not spell the end of the consolidation period, however.
(Updated, thanks to Rossa White for this clarification) The NTMA’s investor presentation has the best graph of what’s supposed to happen in 2015’s budget. In budget 2014 the government agreed about 0.9 billion in revenue cuts and 1.6 billion in expenditure cuts, but the composition of the 2015 adjustment of around 2 billion (as per the recent SPU) hasn’t been outlined yet.
So while it isn’t clear that this last bit of austerity can be avoided just yet, it is pretty clear that (however constituted) the government will try hard not to implement the last few billion of cuts, especially if the 2014 August and September returns are looking good.
I think the question is, given the need to respect the 3% constraint–and please let’s not give any credence to headbangers talking about renegotiating the MoUs, etc., at this stage–what exactly the government will try to do to signal to the public the austerity period is effectively over.
The answer will define the legacy of this government. As Kevin notes this morning, at the last general election, the public voted for change, they got none. They are asking for it again, and much more clearly this time.
Michael Noonan has signalled since the last budget that altering tax bands is on the cards, saying.
If I have the money that is where I will go. I would like to reduce the threshold at which people hit the higher rate.
Fair enough, and this widening of tax bands does make sense as long as funds allow, and perhaps a tweaking of the USC, but the question politicians are asking I’m sure is will this be enough to appease the public?
More news from Queens – their Centre for Economic History (QUCEH) is hosting an interdisciplinary workshop on the economics and history of crime and conflict. The workshop will take place in Belfast on Friday 12 September 2014 and they are currently inviting submissions (with a deadline of Friday 18 July 2014). A key motivation of the workshop is to encourage economists and social science historians of crime and conflict to network and collaborate on future research.
Full details here.
Austerity is not simply an economic phenomenon—societies experience it in different ways, socially, politically, and geographically. The aim of this event is to bring leading thinkers to probe the complex effects of austerity on the European economies forced to experience it by the global economic crisis.
The event will be live-streamed through the INET and YSI network, shown at the Festival of Economics at the University of Trento, as well as various blogs and community sites like Irisheconomy.ie, and we encourage submissions to the panel, which can come in the form of email questions, tweets, and via facebook.
Austerity: Economic, Political, and Social Perspectives
Friday, May 30 Kemmy Business School, UL KBG-16 (map)
Livestream from YSI event in the Univeristy of Limerick, All times are CET
10.00 -10.30 Opening by Dean of the Kemmy Business School, Dr. Philip O’Regan
10.30-12.00 Panel 1: Beyond the theory: Austerity as an economic, and political, reality
Mary Regan, Political Editor of the Irish Examiner, Chair
Mark Blyth, Brown University
Johnathan Hopkin, London School of Economics
Niamh Hardiman, University College, Dublin
John McHale, NUI, Galway & Irish Fiscal Advisory Council
12.00-12.30 Break
12.30-2.00 Panel 2: The wider consequences of austerity on society
Stephen Kinsella, University of Limerick, Chair
Niamh Hourigan, University Collge, Cork
Carmel Hannon, University of Limerick
Seamus Coffey, University College, Cork
Julien Mercille, University College, Dublin
George Provopoulous writes here.