Category: Uncategorized

Following on from last week’s post on Barclay’s and their comments on TBTF European banks, it’s interesting to see that President Obama today announced that he will be proposing legislation that will limit proprietary trading activities of large banks as well as impose limits on their growth in liabilities. Pretty clearly, whatever gets proposed isn’t going to please former IMF chief economist, Simon Johnson, but it’s still good to see these issues being addressed.

I’d guess it’s highly unlikely that any such bill would get passed through the US Congress—and I would have said this even before yesterday’s Senate election in Massachusetts. Indeed, I suspect Obama probably also figures it’s a long shot and that this annoucement and the proposed bank tax are primarily smart political moves from the President: “So if these folks want a fight, it’s a fight I’m ready to have” is just the kind of language to get the currently disappointed Democratic base charged up and it’s probably not a bad fight to have lost and thus have as a live issue going into the midterm elections.

From a European perspective, I suspect this may be an area where there would be more political agreement in Europe than in the US.  An optimist might hope that the calls for limits on bank size from Lord Turner and other senior figures in the UK could lead to agreement at European level. Even more optimistically, one might hope that this could be an issue on which the new European Systemic Risk Board could also make some running to show it’s not just going to be a talk shop. A pessimist might reckon that both the EU and ESRB are far too unwieldy to make progress on such a complex issue.

(guest post by Michael Burke)

Today’s Financial Times carries an interesting piece from Martin Wolf on the severe difficulties being faced by Greece as it attempts to come to terms with its current economic crisis. http://www.ft.com/cms/s/0/eeef5996-0532-11df-a85e-00144feabdc0.html

The FT’s veteran commentator places Greece’s plight in the overall context of developments within the EU, and so has something to say about Ireland. Without minimising the problems of any country, he clearly shows that it is Greece which is an extreme case, not, as is often claimed here, Ireland.

“The problems of Greece are extreme, because it alone of the vulnerable eurozone member countries has both high fiscal deficits and high debt. Other countries with large fiscal deficits are Ireland (12.2 per cent of GDP in 2009) and Spain (9.6 per cent). But, while net public borrowing was 86 per cent of GDP at the end of 2009 in Greece, according to the OECD, in Ireland and Spain it was only 25 and 33 per cent, respectively. Meanwhile, Italy, with a net debt ratio of 97 per cent, had a deficit of “only” 5.5 per cent. Portugal is in the middle, with net debt of 56 per cent of GDP and a deficit of 6.7 per cent of GDP. Thus, the challenge for Greece is larger and more urgent than for the others.”

He also warns that those pinning their hopes on export-led growth are in perliously crowded boat in choppy waters, as they now comprise (at least) 70% of the world’s economy.

Finally, he has a very illuminating chart of unitl labour costs based on OECD data. Although the chart is small, the trend for Ireland is clear and unmistakeable. Ireland has already experienced a sharp reduction in unit labour costs relative to Greece, Italy and Spain. Of course, Germany is an outlier, with unit labour costs way below that group. But, although it isn’t stated by Martin Wolf, that’s based on the much stronger growth of German investment.

Minister Batt O’Keeffe announced this afternoon that the Government has decided to scrap the National University of Ireland. UC Dublin, UC Cork, NUI Maynooth and NUI Galway were the constituent colleges. The total number of universities in Ireland has thus been increased, at a stroke, from four to seven. Ireland should now soar up the universities-per-capita league tables.

Sadly, it will no longer be possible for the NUI to play the role envisioned for it in the 1950s by Flann O’Brien (Myles na Gopaleen). He ended an Irish Times controversy about academic snobbery and the excessive use of academic titles by proposing that NUI should simply confer doctorates on all Irish citizens at birth. Although the government appears to have embarked on a slower progress toward the same destination.

There will now be a difficulty in arranging the next Seanad election, for which the graduates of NUI form a constituency. Unless of course….

Here is an interesting attempt to quantify the effect of recessions on mortality in EU countries. (To access the full article you will have to go to a subscribing library.) The authors claim that rising unemployment is associated with more deaths from violence (suicide and homicide) and alcohol abuse, but fewer deaths from road accidents. No significant effects were identified on other causes of mortality. The net effect on overall mortality is very small.
Two countries – Finland and Sweden – are identified as having social support policies in place that are particularly effective in mitigating the adverse health effects of rising unemployment.

An ‘interesting’ take on the Irish economy by the New Statesman is at http://www.newstatesman.com/economy/2010/01/ireland-irish-social-dublin