League of Ireland in the Spotlight

League of Ireland soccer has been in the spotlight recently. Last week, Dundalk arguably achieved the finest result in the league’s near 100 year history, beating Maccabi Tel Aviv 1 – 0 in Group D of the Europa League. (A comparison of the potential financial return of this to date and that of success in domestic competition can be found here).

Moments after the full-time whistle RTE’s PrimeTime (coincidentally) broadcast an interesting report on changes to the structure of underage soccer in Ireland, and the possible implications this will have for both League of Ireland and schoolboy clubs.

International journal Soccer and Society in conjunction with Routledge/Taylor & Francis Online has also commenced publishing a special edition of the journal which focuses on the League of Ireland. The special edition addresses economic, historic and social aspects of the sport in Ireland. The collection of published papers to date can be accessed here .

What should Ireland be looking for?

It was very disturbing to read the following last week:

Agriculture Minister Michael Creed said Ireland will consider a special free trade zone with the UK if Brexit results in a complex UK split from the EU and the Single Market.

It would be legally and technically impossible for one bit of a customs union and Single Market to have such an arrangement with a third party. To achieve such an objective would require our leaving the EU.

And so I was pleased to read this morning that what the Government is actually going to look for is some sort of special status for the North so as to maintain free trade within the island no matter what the British decide. Presumably this would mean the North remaining within the EU’s customs union and/or Single Market, otherwise it won’t work. (Remember: if Britain leaves the EU’s Single Market and customs union without an interim free trade deal with the EU in place, WTO rules require tariffs on trade between Britain and the EU. This can’t be avoided. And that means tariffs on trade between the Republic and Britain. That can’t be avoided either.) I don’t know if such a thing is legally possible under EU law — though as I mentioned earlier the Kingdom of Denmark might offer a possible model — but it does seem like an option worth exploring.

Beware of weasel words however. Jeffrey Donaldson is quoted as saying that

“What we’re really looking for is a special deal for the island of Ireland which enables free movement of goods and people on the island, and preserves the institutions we’ve created under the various agreements,” Mr Donaldson said. “The people we’ll need to convince are the EU.”

Yes, keeping the North inside the EU Single Market or customs union would indeed require this being possible under EU legislation, and it would require both good will and a fair amount of technical work to make it work, if it is even a runner in the first place. (How on earth would agriculture be dealt with, for example?) But the real problem is likely to come from the UK. Mrs May’s speech over the weekend seemed to rule out a special status for Northern Ireland — I thought she was pretty explicit about this. And how would the DUP feel about the logical corollary of such a scheme, namely customs frontiers (and in all likelihood tariffs) between the island of Ireland and Britain?§ The people that we will need to convince, above all, are in London and Belfast. And let’s start by trying to convince them to remain in the customs union, at least as an interim measure, until a free trade deal can be sorted out.

(And let’s not forget: it’s London that is responsible for this mess in the first place. Why on earth did Donaldson’s party support them?)

§ Yes, a border with the Republic promises to be extremely costly for them, but I presume they also export a fair amount to Britain. One way or another, it looks as though they are in big trouble if London decides to leave the Single Market and customs union.

Three Monday Morning Brexit-Speech Thoughts

Three thoughts after reading the UK Prime Minister’s Brexit speech.

  1. This is the opening salvo of a negotiation. Everything needs to be understood (and therefore, deflated) in this context.
  2. In different places in the speech, Mrs May is talking about restricting immigration *and* having unrestricted free trade. This is a nonsense, and it won’t work. Her description of the process also completely underestimates the negotiating power of the EU. For example, Mrs May said she wants to give “British companies the maximum freedom to trade and operate in the single market”, but not at the expense of allowing free movement of workers for these companies or accepting the power of the European Court of Justice. Best of luck with that.
  3. Beyond rallying the troops a bit, and giving a timeline, there’s little in the speech for Ireland, news-wise, apart from what seems like a very firm decision to negotiate as a United Kingdom–meaning our friends up North and in Scotland are in a bit of trouble as there will likely be fewer border-related concessions for them in the context of a ‘hard’ Brexit.

Central Bank presentations at the DEW

Four presentations from Central Bank economists were made at the recent Dublin Economics Workshop, reflecting a range of research activity on the commercial real estate, enterprise credit and interbank markets. Paper titles and a brief description below.

Eoin O’Brien and Maria Woods: “Applying a macroprudential risk analysis to Irish commercial  real estate prices”

Research focuses on Irish commercial real estate market and presents a range of indicators that can be used to assess the sustainability of prices and enhance the Central Bank of Ireland’s existing macroprudential risk assessments of this sector.  Developing analytical tools to identify real estate risks, among other areas, is a priority for policy makers focused on mitigating systemic risk.  To complement traditional statistical indicators of price misalignment such as the deviation of the price-to-rent ratio from its historical average, two reduced form models are specified drawing on the property literature and long-run Irish data (1985Q1 to 2013Q4) to approximate a fundamental price series.  Periods where actual prices deviate from this fundamental series can be identified over the sample.  Non-linear methods suggest that the relationship between price changes and estimated misalignments may vary over the property cycle.

James Carroll, Paul Mooney (Dept of Finance) and Conor O’Toole: “Irish SME Investment in Economic Recovery”. Link (p73).

An in-depth look at the types of SME engaging in investment during the economic recovery, along with the financing sources behind said investment. Key findings:

  • The share of SMEs investing has increased steadily since 2012, and currently about a third of SMEs are investing on a six-monthly basis.
  • Younger firms, controlling for other firm characteristics, invest more. Improvements in profitability and turnover are important drivers of investment.
  • SME investment responds to regional  economic conditions, as measured by the unemployment rate.
  • Smaller, younger, non-exporting firms, who are likely more reliant on local household spending, respond most to domestic conditions.
  • Investment is mainly financed through internal funds, and there is no evident increase in the external financing share since early 2013.

James Carroll and Fergal McCann: “Cross-country comparisons of SME borrowing costs”

This research provides a methodology to strip out borrower- and bank-related factors which may form part of the explanation for cross-country interest rate differentials. Using the case of UK and Irish lending by Irish-owned banks, the research suggests that, of a 240 basis point (bps) difference in raw average borrowing costs, about 100-150 bps is not explained by bank- and borrower-level characteristics and can therefore be attributed to market-level factors such as bank competition, collateral enforceability and the aggregate outlook for default probabilities. Earlier research from the two authors shows that across Europe, such aggregate factors are indeed associated with higher enterprise borrowing costs.

Paul Lyons and Terry O’Malley: “Monitoring Ireland’s payments system using Target II”

  • Research provides a description of Ireland’s component of the Eurosystem’s large value payment system (TARGET2-IE).
  • TARGET2-IE forms an important part of the Bank’s analytical toolkit in that it can be used to examine the degree of interconnectedness between banks in Ireland; to develop indicators for systemic risk monitoring; to map Ireland’s payment networks to provide a source for measuring price and quantities in the short term interbank loan market involving Irish banks.
  • Early research results identify differences between the interbank and customer payments networks with the customer payment network displaying a small number of highly connected banks in addition to a large number of isolated banks.

 

The Dog Ate My Wind-Farm

The Irish Times relates this morning an Oxford Mail report of a lucky escape for a corporate financier formerly employed with Barclays and Lehman Brothers. Michael Chase-Sarver copped a four-month prison sentence from Judge Eccles at Oxford Crown Court. He had been prosecuted for perverting the course of justice in attempting to avoid a speeding conviction.
He called a witness from Derry who testified that Mr. Chase-Sarver was the promoter of a wind-farm project in Donegal which would cost €1 billion, occupy 35,000 acres and employ 300 people. The judge suspended the sentence, citing the risk to the 300 jobs.
Neither Donegal County Council nor An Bord Pleanala are aware of this project according to local media.
This is surprising. The average cost of 1 MW of wind capacity is about €2m, so the billion Euro tab would equate to around 500MW, the largest generation facility to be built in Ireland since Moneypoint in the mid-1980s. At 35,000 acres the site (70 acres per MW sounds about right) would occupy 3% of the land area of Donegal, a large county. The witness from Derry, a co-investor in the mystery project, claims that agreement has been reached with 100 very discreet farmers.
Ireland already has about 2,500 MW of intermittent wind capacity. Peak demand is about 5,000 and total capacity about 10,000, of which 7000 is dispatchable. Wind gets priority when available and a price guarantee, or compensation if ‘constrained off’. Further additions of intermittent generation, from wind or solar, will add to the subsidy costs and strand more gas-fired assets, many of which belong to the government.