Last Friday, former Maoist – and head of the European Commission – Jose Manuel Barroso mentioned Iceland and Ireland in the same breath.
He intimated that, without the euro, Ireland would be Iceland. The same day, Jean-Claude Trichet, the head of the European Central Bank (ECB) and a man who has never had a job outside the cosseted French – and then European – public sector, claimed that there were no difficulties with any eurozone member. Yet, maybe as a result of Barroso’s claim, the markets in London decided by last Friday afternoon that Ireland was more likely to default than Greece.
So, are they right? Will Ireland default? Will Ireland become Iceland within the eurozone? Will we become the first country to default in the currency union because we do not have the cashflow to fund ourselves? Was Trichet simply blurting out what had been on his mind for some time, which is that the euro is weakened by the parts of its sum?
Those parts are Ireland, Greece, Spain, Portugal and Italy. While we are in the eye of the storm, we are by no means alone. In fact, we should probably try to keep bad company for awhile, rather than standing out as uniquely delinquent.
What both Eurocrats know is that, if this gets any worse and liquidity continues to dry up, either the euro will break up or one of the countries within the eurozone will default. It is quite possible that one or more of the high borrowing group – which includes us – will run out of money at some stage.
The dilemma then for the EU will be whether it has the stomach, or indeed the political will, to organise a huge bailout for the weaker countries. If this is even being partly contemplated, then we’d be better off hiding for as long as we can behind the shield of delinquency with our newly acquired Club Med friends.
In return for a bailout, federalists in the EU would demand increased political integration as the quid pro quo for the money. If you doubt this, look a bit at European monetary and political history.
A monetary union with the euro was fast-tracked following the last currency crisis in Europe. As a result of the 1992-93 devaluations – which saw Britain leave the European Monetary System (EMS), and Ireland and Italy devalue by 10 per cent – the European elite decided that the only way to lock Germany into the EU was through monetary union.
This was particularly the case following what Brussels saw as an alarming attack on the French and Belgian francs. If the markets would not believe that the rest of the European currencies were as good as a Deutschmark, they believed that the EU would eliminate this risk by creating a single currency.
The moral of the story is that Eurosceptic traders in London need to appreciate what happens when they attack the foundations of the EU through its monetary chinks. The reaction is always more federalism, not less federalism. With the likelihood of an EU-wide bailout in mind, let’s go back to the utterances from last week at Davos. Barroso appeared to suggest that Ireland was a basket case, and was only being kept alive by the paternalistic protection of Europe’s single currency.
By extension, he must believe – if he has an ounce of economic grey matter in his head – that, without the euro, an independent Irish currency would collapse.
If this is the case, he has just made the most compelling case for why the single currency is inappropriate, and why much greater central EU tax and budgetary powers are necessary if the euro is not to break up. For this to come to pass, the EU has to become a much closer political entity.
The point of a currency union is that it must be appropriate for the country concerned. If a country’s debt position and economic predicament is so perilous that it would find it difficult to maintain a particular exchange rate if it were outside the union, then the euro is an overvalued currency for that country.
This means that the country would suffer social explosion from membership, resulting from huge unemployment and bankruptcies. Most countries wouldn’t tolerate this for long.
They would try to become more competitive by cutting wages, but workers wouldn’t accept this – and the country would either defaultor pull out of the euro, or most likely both.
Trichet has figured this out, which is why he is telling anyone who cares to listen that the euro is okay. He obviously thinks it’s not, because he has followed recent events through to their logical conclusions. So does all this mean that the credit default swap (CDS) traders were right last week? After all, they are betting now that Ireland, the country with the lowest debt to GDP ratio in Europe, will default more quickly than Greece – the country with the highest.
The answer is that they might not be right, but we should be concerned. We have seen (and I am no conspiracy theorist) an orchestrated campaign against Ireland in the British financial press of late.
This is how defaults happen. First, the country gets itself into a mess. Then the tail starts wagging the dog.
The CDS traders start to take positions against the country in the thin CDS market. Then, the much bigger sovereign bond market begins to reflect this. So people start to say things like ‘‘the CDS market is saying that Ireland is moving into default territory’’, even though we might have huge borrowing capacity.
The traders who are taking abet against Ireland continue to drive the CDS prices upwards, and they leak stories to the media about us. This activity attracts others. Large investment banks start to write notes about the deteriorating Irish position.
Suddenly, what began as a trickle – with a few isolated traders taking a punt – becomes a torrent. It is important to remember that the CDS market is still small, but its ramifications are felt everywhere.
Ultimately, Ireland goes to raise money, and fails to get all the debt sold. This causes a run on the Irish government bond market and it becomes ‘common knowledge’ that Ireland is in trouble.
Because we are already going to borrow at least €18 billion to cover day-to-day spending this year, any shortfall in tax has to be paid for by borrowing. If the ability to borrow falters, we face the very real prospect of a fiscal crisis this year. A fiscal crisis is when the Minister for Finance informs the Taoiseach that we can’t pay teachers’ salaries next month because we don’t have the cash.
This is not so far-fetched. Our banks are being drip-fed loans by the ECB to keep them afloat – like many other banks across the EU. This is obviously what Trichet sees every day, and what worries him about the entire single currency. What has happened to our banks is likely to happen to our state.
Although it might not feel like it this morning, we are seeing the beginning of a process that is likely to lead to serious questions about the future of the euro, as well as the membership of the small countries which have borrowed highly, and about their ability to repay their debts.
We are one of this group. Our best hope now is that we do not end up on our own, and that at least a few strapped countries end up playing Russian roulette with the EU.
I remember some years ago while working on projections for commodity demand in a global sense,I read where the USA while only representing 6% of the world’s popualation ,consumed 20% of the worlds resources,which meant that 94% of the world had to make do with 80% and given distribution data it was no surprise that somebody would go hungry.That figure is now 25%.I suppose the point is when I read that Wall St. bankers paid themselves salaries/bonuses of 18 billion last year which equates to our total debt projected for 2009, it means our hunger pains is a years pay for these buckauns.Ask yourself the question is their pay equal to 4 million Irish peoples debt for this year?What model of regulation and global democracy is the USA promoting exactly?Why do certain people in Ireland think that this model is good for us.?How much resources does the top 6% of Irish society control and consume 25%-30%,maybe some of these infamous auditors can tell us!.How much of the 920 billion of the Banks loan book is pencilled in against this systemically important and economically sensitive 6% of the great and the good of Irish Society??? How many of these 6% have been stuck in Cowen and Linehans ears in the last 6 months worried about the treat to their democracy.Now take a deep breath and ask the one question that’s on everybody’s lips. ” What if the Irish taxpayers as guarantor’s of these Bank loans was to demand a full and independant audit of these Bank loans would it tell us about the structure of our Democracy”?? Im sure the two Brians legal advisors must have done some head scratching to insure that question will never be answered.wink wink.
Seems that my suggestion of letting the banks go broke and creating some nice new ones isn’t “so “off the wall” at all. See the suggestion from the eminent Nobel economist Joseph Stiglitz:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4424418/Let-banks-fail-says-Nobel-economist-Joseph-Stiglitz.html
Exactly Dr.Nightdub, and they will.
I just though I’d mention- Obama I reckon will take over the banks in a matter of weeks incredible as it may seem to some. There really seems no other way to get to the bottom of the black hole.
Pay Talks Break Down
The following is what I wrote yesterday ( above 9.09am ) :
‘Power of Double Think :
Recently , we had a Moon Wobble last 29th Jan and the moon has waned since .On tuesday 3rd Feb we have the beginning of a moon gravity pull that will maximise on Monday 9th Feb ie Full Moon .This tuesday was suppose to allow the moon wobble to exit the previous gravity and its energies have not been allowed to rest and so it is quickly dragged back to the Moon again creating a serious stress in the air around us .
Viewing the present national economics current affairs now makes all of what we see much more interesting .
Essentially we are entering into very dangerous times and if they go wrong during next few days they go very badly wrong.And if they go right they will be perfect .We are viewing two extremes which is what happens in week period to Full Moon.They include accidents, weather extremes, emotion madness or joy , forgetfullness , body pains and unable to sleep .
My guess is that David’s articles this coming wednesday and and sunday will be very hot topic debated here with emotional swings .We are living in very interesting Times now .’
The above is holding very true and the line is now drawn in the sand .My prognosis now at this juncture is Catastrophe .
Time from today will forever Change and a new beginning has commenced .Like all women having birth there is pain and eventualy joy .Like most babies they do not want to exit and prefer to stay inside .Their arrival is usually an upheaval.
We are witnessing a similar trend on a national basis and in that process Time is the factor we must learn to understand .Whatever the change around us somethings do not change like ‘the time it takes to boil an egg ‘.The Irish Gov forgot that .
Presently in these moments this morning the cosmic energies are very very stressful as I wrote yesterday and I can only imagine that our government is not in any normal frame of mind to decide the proper strategy .The Cabinet will be in Total Disaray .So it is my guess that the probability will be that whatever decision made today will commit us as a nation to Indefinate Slavery .
The failure of the Pay Talks was the last straw to Exiting the EURO .We have no choice and the Government has FAILED .
The International Markets will read the same pronosis too and vote with their feet .The Irish Exodus has begun to………..Craic.
I’m no astrologer but I think the whole experience of the peace talks where both governments showed extraordinary patience in dealing with real and imagined issues, means these processes get dragged out; no negotiations here are complete without a suspension of talks, clarifications etc etc etc
It looks like tactically Cowen thought the best approach was to have a week talking about anything but pay and then put the cuts and tax increases (whatever they were) in at the last minute, whether it was right or not.. I think Cowen would be better off to tell it like it is, he’s trying to bluff the bond markets and bluff the workers. Neither are buying it
Although I believe public sector pay has to be slashed, I have a lot sympathy for the workers and indeed all of us who will have to pay more taxes; it is very hard to see fraudsters and banksters walking free while cuts are being taken.
I strongly believe if Cowen is to act unilaterally, he should introduce a maximum wage across the state sector applying to all departments and all businesses whose existence depends on the state. It would be a very simple way to punish bank executives for bouncing us into guaranteeing them, it would save a serious amount of money, would get the public behind him, and by cutting at the top would remove the justification for strike action…..
There shall be no recovery until the establishment is culled widely.
Criminal proceedings have to be launched, and best of all would be the Chinese system of executing the perpetrators of corruption (and making their family pay for the bullet.).
Sadly it requires serious action to get to a solution.
In reality the “Elites” who have led the country into this mess are still grinning widely..safe in the knowledge that all they have to do is lie low for awhile and then reemerge to practice their unscrubulous swindles once more.
They really do not give two hoots about anything as they are well secured…Their own money is safe.
The government should not ask any taxpayer to fork out for the mess unless they can be given a guarantee of being reimbursed later on. It cannot be a wanton grab,
The public has to resist, because if a stand is not taken the current system will be maintained and that is a road to nowhere.
MK1, thanks. I do not fully understand it yet, but I will certainly think about what you have told me and try to figure it all out properly. I am on a sharp learning-curve on David’s site an appreciate all that I am gaining from the myriad comments on the articles.
I am watching QandA on RTE right now, but, only because I saw the “Trailer” announcing that Eddie Hobbs would be on the panel. Now, I am sorry I wasted my time with it. Eddie, who used to seem “balanced” to me, tonight seemed very “one-eyed” and seems to have jumped on the “down-with-public-services” bandwagon.
How will this pan out, if there are no school teachers to teach our children in a few months time; no nurses to care for us when we are badly ill; no Gardai to protect us from the hoards of rioting, looting, disgruntled citizens? Public services are a REQUIREMENT in any civilised society and MOST of its workers are NOT overpaid – quite the contrary, in fact – only the administrators are overpaid. There is more PS money spent TRACKING the money spent than there is money spent on frontline public services! (if you can follow that “riddle”).
Only the higher paid public servants can afford to spend their salaries “off-shore” – most ordinary workers pump their money directly back into our own economy – all of it, as most live “hand-to-mouth”, so nearly all of their salary returns to the exchequer.
What’s goti nto to Hobbs?
Hobbs wants to target higher paid public services people from 60,000, 200,000, 300,000, 400,000, 500,000, or like PK 850,000 – absolutely should be targered, his error is he doesn’t spell it out clearly and it comes across as an attack on the whole service, in my correspondence with him, he states this is not the case.
He did seem one sided last night, v. angry at politicians for messing things up entirely.
Quite frankly, in light of 9/11, I am amazed, astounded that the government didn’t put aside an emergency fund, say 35% of revenue as Alvin Hall advocates, this boom to bust stuff is crazy, a house wife/man, plans their budget and attempts to save something, can’t understand government finances at all, what are we paying these guys for?
Noticed on Q&A with Groucho O’Dea, that they guy turns extremely nasty and personal in his attacks, like Ahern and Cowen, seems FF is a party of bullies.
a part of idiots and bullies. Like Paul Krugman’s labelling of the republicans as the “supid people’s party”.
Since the introduction of the euro, the PIIGS have failed to keep up with Germany in the cost of labour.
2007 Unit Labour Cost Index (2000=100) from OECD
Brazil 97.5
Germany 98.4
Portugal 116.5
UK 119.0
Italy 120.9
Greece 113.9
Spain 122.7
Denmark 122.9
Ireland 125.3
This endemic competitive weakness just compounds the shorter-term problem of government and bank debts.
A 3-page article in Der Spiegel that discusses whether some European countries could go bankrupt is worth reading.
http://www.spiegel.de/international/world/0,1518,604523,00.html
If Ireland became bankrupt it could come under EU administration. This would almost certainly include the most painful of all cures – mandatory wage reductions in order to get unit labour costs back in line. It would be a lot easier for the government to get the EU to do the dirty job than to do it itself. Otherwise civil unrest will no longer be the privilege of countries such as Indonesia or Thailand. The recent crowd trouble in Greece industrial unrest in UK could very well turn out to be the dry run for much bigger and more trouble across Europe as reality begins to bite.
Dr Nightclub queried my conflicting comments:
6) Taxes on existing private enterprises need to be dropped – to zero if possible.
7) Funding and grants of all sorts to private sector should be eliminated.
By elimination of grants you eliminate more PS costs. The PS Cost portion of that Grant would be disproportionately high relative to its benefit. Get government out of business entirely (aside from the usual legal regulations that apply for the rest of Europe). IDA, FAS and the rest of the quangos are generally useless. Same for most of the nonsense on innovation stimuli.
The way in which you “grant” aid business is by giving it business/ work to do. Not handouts.
Anyway, all of this has become a moot point. FF and the lads have really screwed up big time here and in the eyes of the bond market. The PS will be cut for sure – except they will not have any choice in the matter (courtesy of the IMF or EU Administration or whatever) and 8Bn may not be available for the bank bailout. It’s not theirs to use. We are well and truly stuffed. FF/Union partnership (which it has been for the last few weeks dictating the future of the country) is gone. Next few days may see a rush at last minute negotiations – but really, for what? to what end? The decision is now out of their hands. Government may as well resign and the Union bosses are about to have a major cull in membership (or a lot of unpaid dues). What a bunch of plonkers!
What about the guys who made millions and others billions , with their helicopters and foreign properties and who are not paying any tax?
What about money being sent offshore?
What about companies involved in creative accounting? all those who have dodged the Revenue?
What about the banking and corporate executives awarding themselves millions in bonuses and golden handshakes when they call it a day after they have wrecked the economy, plus the have pensions PAYE workers couldn’t imagine?
If you were to target all these people the government would bring in 100′s of millions – no word on this from IBEC! No word on this from Mary Coughlan!
Are our companies following in the footsteps of UK companies as highlighted in article below – we have no idea.
Guardian investigation – UK- Companies sent billions of potential tex money abroad
http://www.guardian.co.uk/business/2009/feb/02/tax-gap-avoidance
Arthur Anderson was fleeced due to the Enron debacle. E&Y & AnIB??? This question should not go away.
On grants being eliminated…bear in mind also that the big boys benefit most from these handouts. Ever apply for a grant? You need big company admin to handle submissions in many cases. There are billions in handouts to farmers, big business etc that should be clawed back. It’s vote buying nonsense and ISME members get little from it.
I must say I was most impressed by Q&A last night by the Man from Navan and his from the heart comment to the panel and particularly to FG&FF to stop bickering and start leading. Maybe, just maybe, his ilk are becoming the ground swell. There is still a lot of ignorance out there as to how nasty this crisis is. The impending learning experience may fix that in short order. Now all we need is a new party. “The recently returned home from America and what a mistake that was” Party.
That Navan man represented the silent majority, spoke with passion, an honest man it seems who is taking the hit and suffering, exasperated by Willie O’Dea and the bickering, interested in solutions and saving the country but bitter at what has happened.
Struck me as the kind of old school gentleman who made it the hard way but slept with a clear conscience and does a good deed when he can – it’s the Ireland that is slipping away.
On the Financial Crisis
http://www.zcommunications.org/znet/viewArticle/19111
Now this site is as free of racists as can be reasonably expected- I’m back. By popular request. So, don’t diss me, cuz I don’t care what anyone thinks, innit. If you don’t like me, don’t look at me. Just press PgDn as often as it takes. OK? Good, now to work:
I assume David wrote this whilst ‘tired and emotional’ in an airport lounge waiting for a flight back from Davos. It’s not up to his usual standards, to put it mildly. And, whilst I agree with Lorcan’s tart analysis, I think I need to go further.
Barroso has got form for stirring it. Whether it’s claiming that ‘senior’ Brit politicians secretly wish to join the Euro, or recklessly inviting speculative attack on Ireland by explicitly comparing it’s problems to Iceland.
Barroso is a scheming, devious, manipulative creep of a Eurocrat. Explains why he’s Head Of The European Commission, I guess. I suppose he thinks he’s being terribly Machiavellian with this totally irresponsible behaviour, with another barely disguised threat of ’you will sign Lisbon’. He needs a good slap. It’s one thing for journalists to legitimately sketch possible scenarios but when a supposedly responsible politician does, it’s simply unconscionable. Trichet is another dud delusional career bureaucrat. Just watch him writhe and squirm over the next few weeks/months.
DMcW‘s :‘The moral of the story is that Eurosceptic traders in London need to appreciate what happens when they attack the foundations of the EU through its monetary chinks. The reaction is always more federalism, not less federalism.’
DMcW‘s : ‘We have seen (and I am no conspiracy theorist) an orchestrated campaign against Ireland in the British financial press of late.’
Huh? David’s shown mild symptoms in the past, but this is overtly paranoid nonsense. Markets in London, Frankfurt, New York and Tokyo ranked Ireland relative to Greece. As did Mr Market in Dublin itself. Shock, horror: Irish ‘patriots’ I know are shorting Ireland Inc.
Yes, it’s ‘always been Britain’s fault, 800 years of oppression, etc’. But this silly FF/FG Victim Script as diversionary tactic isn’t going to help one bit in this situation. Are you suggesting Barosso is in league with Brown and Darling to destabilise Ireland? For what purpose? So there’s a mass exodus on the overnight ferries to Liverpool? How, exactly, would such an outcome benefit anyone, especially Britain with it‘s current wave of mendacious BNP hijacked strikes on the theme of ‘British Jobs for British Workers‘?
The main theme in the British financial press of late has been the whole ‘sterling collapse means Rekyavik on Thames doomsday scenario’ which entertains the writers and readers of The Telegraph but which shouldn’t detain serious people for very long. Ireland has had a few mentions, but not as many as Greece or The French rioting with their customary aplomb. You can always rely on The French.
There’s blank cartridges in the gun, so don’t even think of playing Russian roulette with Angela and Sarkosy. Either Ireland sorts itself out on it’s own terms or it will collapse and be run by Europe ‘in receivership’. Blaming everything on ‘inside or outside enemies’, real or imagined, is hardly constructive given the urgency of the situation. As for the other FF/FG diversionary fantasy of The City of London imploding. How likely is it that the G7 can/would allow this to happen? Simply impossibly dangerous. If it ever did unfold, the downward vortex would certainly put the Lehman Brothers ‘fireworks display’ into relative context.
As well as irrevocably implode Irish exporters. Not something to be wished for by even the most deluded of traditional FF/FG ‘pseudo-patriots’ unless their rose-tinted views of Past Oppression are more important to uphold than engaging with Ireland’s C21st prospects by reinventing Ireland root and branch. The former, I suspect.
It wouldn’t matter anyway. The Brits would just casually present Germany with the compound interest bill for ridding them of Nazi infestation, whilst simultaneously ‘requesting’ the return of all the EU structural funds they have put in the collection box since time immemorial. And ask for their share of The Marshall Plan budget, which was sorta forgotten by the Yanks. Not a good outcome for Ireland Inc. Or anyone else outside of a managed psychiatric care environment. And if Britain in Bankruptcy is forced by Lord Mandelson and Sir Kenneth Clark to join the Euro-Mark, what happens to Dublin’s financial centre? Oh, I see. It will compete. Very droll. Wait till Obama nukes Ireland’s Yankee Dollar tax haven, just like Brown is gonna nuke Jersey, Isle of Man and similar reprobates. I’m sure the events that follow will also be the fault of ‘The Brits’. Natural Justice and warped ‘national’ pride will surely demand it.
‘Rapid depreciation of GBP versus G3 currencies prompted its inclusion on the next G7 meeting agenda. France’s Lagarde chastised BoE for standing idly by as GBP crashed’
It’s interesting to see how the Franco-German propaganda machine is still trying to hold the line by enlisting the cognitively challenged posing as serious journalists:
“More serious is the :existence of the only large currency in the EU which can move dramatically against the others — especially the euro, with its 16-member states. British exporters can expect to make the biggest gains in the euro region, their biggest and nearest market. Who are they telling? While we suffer in helpless silence as sterling plumbs new depths, the fury of the irascible Mr Steinbruek must be a joy to behold. It is not clear that he can do much either, but something may have to be tried.
Britain could try for membership of the euro at a far more competitive exchange rate than would have been possible at any time since 1999. That seems unlikely. But if the pessimists are right about sterling’s prospects, the equally unlikely ideas of internal EU tariffs on British goods, or limitations on the access of its banks to the ECB, could start to appear on the agenda. Bossy Brown may have trumped the Germans — for now. Irish politicians, take note, the British PM’s borrowing makes him popular at home — but the price may be too high’ By Brendan Keenan. Irish Independent. Sunday January 25 2009
Wake up call, folks: The only way Britain will join the Euro in the next 20 years is by the EU/ECB applying the same ‘principles of democracy’ as are being enforced on Ireland over Lisbon. [75% of Brits ‘No to Euro’ in latest polls] Dream on Brendan. If Germany forces Ireland to exit The Eurozone in despair having been deflated to oblivion: Sean Six-Pack will figure out Herman’s to blame for Ireland Inc finally become ‘Sicily In The Rain’ as part of a new peseta/lira axis of economic and nationalist ‘manana-ism’.
Internal EU tariffs on British goods? Yeah, that’ll work. So will imposing draconian £££ tariffs on all Irish trucks docking at Liverpool and Pembroke. Send everything by sea to France! Look at the chaos over ‘foreign’ workers in Lincolnshire. Is Brendan a blogger or does he actually get paid a wage for this nonsense?
No mention by either McWilliams or Keenan of the collapse in confidence triggered by Lenihan‘s absurd performance on BBC Newsnight. Assuring foreign investors that all‘s still green in the garden of Ireland, sure it is, if that nice new President just backs off from chasing down tax evading ‘patriotic‘ American companies who have used Ireland as an EuroZone airstrip, have no loyalty to the country, and will leave as soon as they get a better offer. Oh, I forget: They‘re already packing up for Poland. So much for that ‘special relationship’. Didn’t show up on the Dell balance sheet, did it. Just as I predicted here, aeons ago.
If the Irish economy is currently ‘thriving‘, it would be interesting to tease out of Mr Lenihan what Ireland in a recession verging on a depression would look like. The man is out of his depth. And drowning. I can’t wait to see the photos of him and/or Cowen presenting a big bunch of shamrock to O’bama. But that’s unlikely to happen. Neither of them will be in office then. They’re in office now, but they’re certainly not in command.
Like Iceland, Ireland needs the catharsis of an election. Unlike Iceland, Ireland has a shelter from the storm until it decides it’s future: The Euro. And the Euro is Germany’s problem/challenge. Not Ireland’s. Ireland would be signing it’s death warrant to leave the Euro. Just wait patiently until either the fanatics at the ECB wake up, or hang in there till the Euro implodes. Then there’ll be a queue for the exit and no blame or shame would attach to Ireland going it alone, adopting the Dollar or whatever makes sense to the tortured Irish psyche.
As for the deflationista extremists on this site. Unless you’re proposing years of extreme martial law, I’d drop the textbooks and take a look outside the window. If Obama and Brown/Darling screw up, Ireland’s in deep doo-doo. You can sit on the sidelines wearing Sarah Palin’s ‘I Tolds Y’all So! 2012’ t-shirt, or do a crash course in Ich Bin Ein Berliner whilst looking for apartment rentals for your Euro Uber Alles future.
Forget the Victim Script. Get down to some serious creative thinking on how Ireland best exploits the Obama Presidency as he attempts to safely land the crashing plane of the US economy in the Hudson River. And stop bustin Obama’s balls before he’s even managed to get all of Bush’s crazed graffiti off the walls of the Oval office. Mind you, if he turns to be the closet trade protectionist some suspect, all this will be irrelevant. We’ll all be in a different world.
Instead of wasting your time emotionally ventilating about ‘The Brits’ (whoever they’re supposed to be), I’d focus Irish brainpower and wit on an Irish Solution For An Irish Problem. Just like the Brits are doing:
http://business.timesonline.co.uk/tol/business/columnists/article5636248.ece
Does this qualify as a ‘diatribe’? Hope so. If not, I’ll just have to try harder next time. *rollseyes*.
Jeasus Andrew, while we pay too much attention to Britain you spend a lot of time diagnosing our preoccupation,… Of course an agent provocateur couldn’t have a complex, that would be too simple, it would have to be more complex, maybe a multi layered complex about our complex, a meta complex if you will..
Welcome back!
Mooney – pretty much spot on. Apart from the Times article. Kalestsky is an idiot – he’s predicted that everything was fab’n'groovy unti three weeks ago. Then he proposed taxing savings to make us spend.
The UK won’t adopt the Euro. Its not economic – its political. The pound is being beaten up because since some of the flakier currencies in Europe have disappeared (e.g. Italian Lire) – its a sitting duck. There’s a view in the UK that the EU is unaccountable – and a stitch-up – the French get the CAP money, the Irish get the structural funds (even though Ireland is a net contributor – as my Mother’s family like to point out), the Brits get shafted. As you say, the weakness of the pound helps the UK at the moment. If anything, the Euro is overvalued relative to sterling and the dollar.
Are you suggesting Barosso is in league with Brown and Darling to destabilise Ireland? For what purpose? So there’s a mass exodus on the overnight ferries to Liverpool? How, exactly, would such an outcome benefit anyone, especially Britain with it‘s current wave of mendacious BNP hijacked strikes on the theme of ‘British Jobs for British Workers‘?
Well, you don’t need the Scottish – I mean British Govt and Barosso to destablise Ireland. The Irish Government are perfectly capable of doing this by themselves. And the complaints about the strikes – being driven by foreign sub-contractors being brought in at a time when unemployment has surged. People are really angry about this.
I never understood the logic of other EU countries bullying Ireland. The British tried it for years and it didn’t work.
My perspective on the Irish economy (for what its worth) is that it was being driven by a credit/construction bubble – and that has now burst. The fall-out is unpleasant. If Ireland still had the punt it would have the option of inflating away debts – although there’s a high probability it would get clobbered.
D’y know I always thought that when the Irish Economic Bubble burst I could pick a decent two-bedder flat in central Dublin for £3.50. Turns out I was half right. It’ll be 3 euro 50 – but by that stage sterling will have collapsed – so it’ll cost me several years’ wages…
As someone who lives in France could I plead for a little bit of realism with regard to comments like “or The French rioting with their customary aplomb. You can always rely on The French.”
The French are pissed off with Sarko, who promises much but delivers little (recognise that?) so the activists (read – the usual suspects plus a few others on each occasion) get in the streets and the government reacts, protest justified. It has been like that since 1789. Fillon the PM was on the tele pronto with 1000 projects designed to re-launch the economy; Sarko will make a broadcast to the nation on Thursday. Recognise that? it is called populism in some circles, but is also good government PR management, something you’d think FF would know something about.
This whole affair is about optics, seeming to be doing something. There is very little any ‘authority’ can do as long as they continue to say ‘we need a strong banking sector’, while not doing much to get one…..
Bye, Barry
I feel sorry for certain public sector workers such as the very young primary school teachers etc earning circa 20k. To hell with those earning over 60k. How about the fact that an awful lot of foreign workers are now on the dole here now, why not hit those by limiting their dole to 6 months. For example, what Polish person in their right mind would go back to Poland to get 22 euros a week if they can stay here and get 204 euros, subsidised rent and a medical card etc.
The Nigerian situation is equally infuriating if not more so. That’s the same again plus hugh numbers in prison that costs the tax-payer tens of millions per year. Let’s talk about this elephant in the room for once.
Folks, this is disgusting:
The pension levy rates are as follows:
A person earning €15,000 gross would pay a pension levy of 3% and the levy rises gradually thereafter.
* 5% on a salary of €25,000
* 6.4% on €35,000
* 7.2% on €45,000
* 7.7% on €55,000
* 8.1% on €65,000
* 8.5% on €85,000
* 8.8% on €100,000
* 9.2% on €150,000
* 9.4% on €200,000
* 9.6% on €300,000.
Look at the relative “Hit” they are going to get: 3% on €15,000 (not 1.5%); 8.5% on €85,000 (not 17%); and only 9.6% on €300,000.
!!
In order for this to be equitable, the person on €300,000 would have to be hit with a levy of 60%, relative to the poor Joe on €15,000; or, at least, 30% to be on a par with mo dhuine on €85,000.
These figures are all-over-the-place and they hit, as usual, the little guys the hardest, while the fat-cats get off light.
Speaking of “little guys”, they have hit the children’s allowance as well.
Gimme a bucket!
Yep, they’re quickly disincentivising work. It’s an old trick which almost killed Ireland during the late 70s and 80s. They’re back for another shot at it now and if they do it right we’ll be economically toxic for a long time.
Just thinking, one major banking default and they’ll have to raise income tax. Between levies, direct and indirect taxation we’ll be back in the 70s levels before long. Eddie Hobbs suggestion to leave the country looks a good one as every cent I give this shower seems to be wasted.
You are bang on Tim. My sentiments exactly! All the more reason (as I mentioned above) to save on expenditure elsewhere.
Ah, now really – UK Speak-. Would you ever get on with yourself, Now -Irish Speak.
Money to the UK and from the UK has been in balance since the eighties. At the insistence of Mrs T.
While the very idea that GB payed anything to the Marshall Plan, when the UK receive a grant from the USA for every soldiers day that they stand in Europe ( and it might go astray, if you asked, if the same system holds for Iraq and Afghanistan). They are just cheaper, day for day. Shifting, a Lindy Ireland from WV is expensive, you see she expects things. The average UK bloke’ette from the same background expects the return to thir old life.
The UK had no money to pay for a plan for themselves, nevermind for Europe.
this new thingy does not add to the , Well @mooney
Question: Will the new pension levy apply to members of the Oireachtas and the civil servants in their departments?
yes
The levy hit on the PS is crazy and seems designed to be inequitable. I am not exactly a PS supporter here. But if this is what caused the talks breakdown last night, I am going to find myself supporting ICTU…world is getting weird. All the cuts are soft targets and gutless. The less say you have, the bigger the hit. Is this a joke? Oh no…it gets better. The lower end of the scale have no pension to speak of and pay for the fat cats on the other end. Cowen is no doubt thanking the low paid teachers, care workers etc for their very generous contribution to his 1.4bn…now where will the 600M come from and that’s just current spend!
Maybe the best bit is for the fat cats after all.
Folks, the “strong action” taken today to restore international confidence in Ireland’s financial management confuses me.
How can taking money out of people’s pockets (thus, taking it out of the economy, since they have LESS to spend in that economy), stimulate sales for businesses/services/VAT, etc?
If I am a nurse on 35K-40K and the state has now taken an extra €65 a week from me, I cannot go out for a meal once a week anymore, so the restaurants close and put more people on the dole. OR I cannot go out at the weekend for a few drinks in the pub, so it closes/lets staff go onto the dole. OR I cannot replace my car this year and the garages suffer and let staff go onto the dole/close down, whatever.
This €2.1 Billion has just been REMOVED from the real economy; instead of giving people the confidence to safely spend again, thus spinning this money through all the shops and services in the country, it has, effectively, been “shoved under the matress” by the government and this can only do further damage.
How does this “boost confidence”? Economics is a weird science, if it does; and I just cannot seem to get my head around it.
I am trying ………..
I am one of those people on a salary slightly under what you have said, I have cut all unnecessary expenses, mobile cut back, cinema cut back, socialising cut back, no more lunches in restaurants which alone adds up to a saving of 200-250 per month, I am doing this to offset the money the goverment is taking out of my pocket, I am going to cut, cut, cut, this will mean less money in the economy as you have pointed out, a lot less if everyone else does it.
The government have gone too far, we need STIMULUS, not fear, we need the government to borrow if they have to (they should have created a rainy day fund for this eventuality but they were too preoccupied with tribunals)!! We need a tax cut not a ‘pension contribution’ – I think they know we are on the edge of an icelandic abyss, they know there are no replacement jobs coming on stream, they know there will be 500,000 unemployed by December, more next year, they know this is the end of Ireland Inc, hence restrictive measures to save their skins.
They are once again driving the people onto the boats, if I go, I won’t look back in anger, I will never look back.
Tim it is weird, it is an inexact science. fourstar pizza and the subway chain are to create loads of jobs here because of what you just said. We would have to keep borrowing to run the economy as it has been running. Stay off the luxuries for a while and get the odd pizza instead and we will ride this wave much better.
Too many wage increases over the years has led to this mess. Every five private sector workers carry one public sector worker. People forget about job security too, a load of any worker’s mind if you have it.
John, I think I understand what you are saying and I appreciate you, even, engaging with me (since we have disagreed in the past), but I have to tell you that “job security” is non-existent in the public sector. Over 1000 have already been let go and about 2,000 teachers will be let go in May and June; so that is not an advantage that PS workers have, although the media spin would have you believe that it is.
On pensions: the spin has always suggested that Public sector workers got FREE pensions; this is a lie – most contribute towards their pensions for forty years at 6.5% (more, if they want the “widows and orphans scheme”, which allows the dead worker’s family to claim part of their pension for a number of years even after death).
For instance: If a teacher works for 40 years and pays into his pension for 40 years, he will retire after 40 years with 40/80 – that is: forty eightieths of his finishing salary (which is 40/80 of about €60k, unless he has extra qualifications).
So, upon retirement, having paid at least 6.5% of salary fo 40 years, he gets HALF his finishing salary or €30k (less Tax), as a pension. When he dies, and the vast majority, statistically, die within five years of retirement, his wife and kids get half of that (now, a quarter of his finishing salary) for four years; after that, they get NOTHING. This is what they call “The Rolls Royce Pension”? Today, the announcement is that he has to pay more than DOUBLE the price for the same pension. No extra benefits. And he has no choice – since April 2004, he is signed up automatically to this pension scheme.
Now, no-one ever became a teacher “to get rich”, I know ….. but this is ridiculous! (Especially when you compare it to the earnings of others with degrees+post-grad qualifications in the private sector and the higher-paid civil servants.)
I would hazzard the guess that most public servants never get what they paid into their pension and neither do their “spouses and children”. At the very least, the private sector companies that operate the schemes must be making profits, or they would not be still in business.
Now, these private sector businesses, have “Gambled” on the stock market and lost, are being facilitated by our government to recoup their losses.
Should the taxpayer’s money go to the provision of services, like teachers, nurses and gardai, sewer maintenance and bin-collection, or should it go to BANKERS? ADMINISTRATORS? POLITICIANS?
Well, …….. ?
Screw the little-guy, …… see where that gets us.
Totally agree Tim, but we will be spending this money anyway probably investing in pension funds outside the state.
Why not set aside this public sector pensions ‘levy’ for say €1 billion to be invested in companies employing people in Ireland this year. This would give this companies access to finance to sustain employment and create opportunities.
How could making contributions to a pension scheme and deducting them from the ‘pay packs’ of many already hard pressed public sector workers be seen as a ‘saving’ ? Last time I checked you have to spend ‘cash’ to invest in a pension scheme. Not many workers in Ireland these days can afford to contribute to pensions with ‘disposable income’.
The more I hear politicians talk about the economy, the more I believe not one of them has any comprehension of the real magnitude of the numbers. Today, I heard Minister Eamonn Ryan say we need to cut ‘spend’ as the government plan to spend €65 billion this year with €37 billion in tax. Has the deficit now nudged up around the cabinet table to €27 billion for 2008? There is obviously a ‘one pager’ handed out at the cabinet meeting in case anyone is asked ‘where the government spend cash’. Ryan said €20 billion is on payroll, €20 billion on services and the rest (€15 billion) on services and ‘other stuff’. I heard Mary Coughlan on RTE give a similar ‘simplistic’ breakdown with the same even split between payroll and social welfare payments and again Dermot Ahern in front of the ‘social partners’ today. None of them have been picked up on speakign absolute nonsense – not even close !
Maybe they have been told something we don’t know but at current run rates (€820 million for January), we are spending about €10 billion on social welfare. €9.4 billion was spent in 2008.
Politicians using ’round’ numbers (which are billions of the mark) but at the same time have a ‘pretend’ fight over a ‘notional saving’ of a couple of billion – it gets me thinking no one in government or for that matter the opposition political parties has a clue about the facts. How can they formulate and propose credible solutions if they don’t understand the underlying problems?
The government propose their solution to an ‘economic stimulus’ is to continue to borrow to spend over €8 billion on capital projects such as more roads (I don’t know any business which needs more roads to export, the cost of sending cargo out of Ireland has plummeted in recent years as there is 3 times as many full containers coming into Ireland as going out) ? They announce today savings of €300 million equivalent to 3%, everyone knows the cost of building has gone down at least 20% and could be 50%. They will announce an achievement when they save (defer spending) another couple of hundred million. One of the Ministers announced they will spend more on ‘labour’ intensive capital projects, why not just announce 50% will be spent on labour that would create 100k jobs this year on 40k !
To put it in perspective, the Department of Finance have released figures showing tax revenue down 20% for January year on year (if it stays at this level we will have tax revenue of about €30 billion for the year – €35 billion deficit!). But at the same time public sector spend is up 11%, and a whopping €160 million for one month in Health (annualised that €2 billion more than 2008 – familiar number). And there is more….Dept. Agriculture & Food is up 45%, Dept of Environment is up 22% – where are the cutbacks –is there none in these departments?? Why is everyone in the Dail afraid to tell the truth or maybe the problem is none of them are being told the truth by the departments who spend the budgets ? The mind boggles on how we can have a credible plan for recoivery if all we do is ‘tinker around the edges’..
Johnny numbers have to be accurate and as a result have real meaning.Nobody could run a Buisness on false or misleading information.Ryan and Coughlan are hopless when it comes to economics.I am shocked and embarrased at times when I hear them quote figures,Im sure if you asked either to say how many zero’s make up a billion they would try to count them out on their fingers.Cowen says tax take 41 billion ,breaks down roughly 20billion pay,20billion services.On the pay side of 350k employees or average pay of 57k[20BN/350K} with levy @ 7.8%average gives you roughly 1.4 billion saving.{round numbers} fairly accurate figures by Cowen if you care to believe him.However on Prime Time tonight Dermot Ahearn took up a point I had raised on my previous post when he chose his words very cleverly and said ” remember the top 6.5% of taxpayers pay 50% of the tax” and then passed onn to some more inane drivel.The question I would have asked him was”how much of the country’s wealth does this 6.5% control,and is the Minister suggesting it could be as high as 50%” That might have took the smug ,selfserving,look off his puss,the little apologist for a poorly regulated,neoliberal failed state capatilist system that he has idolised with his pea brain all these years.I can argue the proposition behind my post ,He misrepresents it for a soundbite just like the rest of Cowens lackies.
Rte news. US President Barack Obama is to set a $500,000 annual compensation cap for executives at companies getting taxpayer bailouts
The Germans did the same with their bailout even forcing some to hand money back.
I cant understand why Ireland isn’t doing this, An open goal and the politicians are refusing to take a shot.They cant be that incompetent, they must know it would be a popular move. So what is going on behind closed doors that this is not happening?
Lets say you’re family was earning 60k take home, and were used to the lifestyle, and now for whatever reason you are now taking home 37k…. What would you do?
Well if it was temporary and you had outgoings that were difficult to change you’ld go to the bank and try to get a loan for some of the extra 23k. But even if it was temporary, you still wouldn’t still spend 60k that year, youl’d spend less. If there was stuff that really needed to happen that year and couldn’t be put off e.g. for a child starting school or college or a plan to make some more money you would keep that going as we all have to plan for the future. But you’d look at everything.
if you were sure your family’s earnings would bounce back to 60k again next year, then you might borrow close to 20k. If it was going to take 2 years, borrow less. Of course if you’re worried the the drop will be there for a few years, then its time to hunker down…
Now lets pretend for whatever reason just before the drop in your wages, you guaranteed a friends mortgage of a house for 460k, and that is known by the bank manager. So now when you go the loan, that would make them think twice about loaning you much of the extra 20k. If your friend has been caught lying on his mortgage application form after the event then this might cloud your bank managers judgement further.
Multiply those amounts by 1,000,000 replace friend for banksters and thats roughly how I understand Ireland’s position.. I know its not the exact same because in most families there isnt stuff that you can invest in to get a return in a few years….
Any family whose parents gave a sh**, would make a few sacrifices themselves first (at least for the first while)… And here that should mean the leaders should lead from the front… Instead our generals are leading from the back or rather shoving those that have no influence or power out under the bus first… For our politicians to continue paying themselves more than any other country in the present climate is scandalous. And I would question the capital spending they are doing….
On pensions, my understanding is that the money wont be collected and invested anywhere, public service defined benfit pensions come out of the 60B current spend so I think they just wont borrow as much…. Its effectively a pay cut.
Garry, you are correct, I think – except about the pensions; you see, in 2002 (I think it was), Charlie McGreevy decided, as minister of finance, that paying pensions out of current spending was ludicrous – and he was probably right – so, he set up the pensions reserve fund to manage the money in order to cope with the future differential between the numbers working an the numbers of people on pension.
The two Brians have now “RAIDED”" this fund to recapitalise the banks.
This is a problem, “going forward”!
Tim, you are correct, the two muppets have raided the country’s savings to bail out the sheepskin brigade. In the true spirit of a free market, these failures would have been allowed to fall on their sword ; instead they’ve been kept on a life-support machine by the taxpayer. They are failures ; they have proven themselves incapable of judging risk ; they have pathetically played the patriotism card (we want Oirish banks in Oirland! … spare me) in order to preserve their cosy little club ; and our gombeen Government has fallen for it hook line and sinker.
All for the good of the ‘wider economy’ we’re told. Mmm … well the world has moved from that. It’s an international arena out there ; the concept of ‘keeping it Oirish’ has gone the ways of the dinosaur.
Salaries in the financial arena need to be dramatically re-calibrated – downwards. And not just the upper management, rather right throughout the system. Only when they pay for their own mistakes will they learn their job, and assess risk correctly. Let the free market be free.
On the subject of cutting to ‘boost confidence’ ; it is necessary. The choice is either continue to borrow and overspend and go broke, or else cut back in order to pay our way. The public service is very important, but it has to be calibrated to the wealth-generating ability of the economy. (And that’s real wealth, not pretend wealth like we had in the Celtic Tiger). Right now, our economy is being found out, because the wealth-generating sector is being pared back to the bare bones, with all the pseudo-wealth being consigned to the dustbin. This is a painful readjustment for working public servants I’m sure, but not painful as the dole, a 100% haircut, a big loan, and no prospects – which is where a lot of private sector workers are finding themselves. Unless you work in one of the ‘big two’.
Ultimately, the real ‘confidence’ in question is the confidence of international creditors to lend us money.
Paddy
I know a family of two teachers. The husband retired 2 years ago, in his 50′s, the wife job shares. They live very comfortably. More so than I. But I don’t begrudge them this, I would love to be in their situation, but my situation is far from bad (yet). My point is this example jars somewhat with the image touted about of impoverished PS workers being hit for the very bread going into their mouths.
Perhaps this is an isolated and extreme example. But it is a fact rather than a generalisation with little or no substance to back it up.
I feel we are getting too much into the shoes and bovril territory.