Ireland's four-year recovery plan

And they are doing this so they can afford to bail out the creditors of the Irish Banks.

I am not Irish but doesn't seem fair to me.

Not entirely surprised the Irish should wish to protect education. Their system is first class, which is why, before the politicians and their property developer cronies got their heads in the trough, the Celtic Tiger was a reality - lots of very well educated and motivated youngsters to fill the jobs attracted to the country by the low Corporation Tax. If the country can stop the likely brain drain, they will be needed badly if Ireland is to restore its economy. Only this time vote in a government not in cahoots with people only interested in lining their own pockets. I for one wish them well and a good dose of that Irish luck!

Stephanie what is the likely effect on aggregate demand in the Irish Economy of the new cuts package?

In the UK the OBR is very vague about this - their comment on the multiplier effect ranges from -1 to +4 or more - I'd claim sometimes it reaches +10, which makes the whole strategy of cutting rather than growing out of the debt look decidely risky.

And as we know changes in aggregate demand have a huge impact on GNP, growth and inflation/deflation, so surely a point is reached where the impact on GNP of a major fall in aggregate demand from government spending reductions causes the economy to shrink by so much that the government's tax revenue falls by MORE than they cut in the first place?

Where is that point in Eire - and where is it in the UK? I'd say that the Irish experience shows that the aggregate demand multiplier has a strong positive value and that if you work through what has happened in Eire with a major contraction in GNP and the PSBR going on rising, there is plenty of evidence that beyond a certain point the strategy is self-defeating.

As to export-led recoveries, who can possibly take this seriously in the current trading and economic climate?

In the Uk a major fall in aggregate demand would drive us into recession, at which point unemployment would rise sharply and the risk of a meltdown in property prices would become very real - if this happened there would be a second massive banking crisis in the UK which could not be prevented by another bail out because we siply couldn't afford it: the Irish crisis would pale into insignificance in comparision and we don't have EuroLand to underwrite Sterling....

So ultimately wealthy investors make money while ordinary working people lose their jobs. Capitalism doesn't work for the vast majority of people and needs to be changed!

This is daylight robbery of the Irish people. If this is allowed to happen in Ireland it won't stop there. Who will be targeted next so that the banking elite assume more control over the people and natural resources of a nation. Is there nobody, not one person in the BBC willing to speak out about this scam?

I may be the only one that supports what the Irish PM is trying to accomplish and it is too sad that he was forced by the EU to accomplish it. The boom/bust of the Real Estate industry affects all of us (especially here in the US).
Austerity is going to be tough, especially as such drastic cuts now are not going to do the job in total.

The protection of eduction is key for Ireland. The educated citizens are the key to having continued attractiveness for business, the low tax rates are not enough.


I only iwsh that our politicians were as forthright here,...perhaps someday.

Large cuts in Irish Government spending are only necessary because of their wrong decisions made earlier in the crises caused by the Wall St crash.
In Ireland - as in the UK - a disproportionate proportion of tax is collected via Banks. That's because neither businesses nor families deduct tax from their interest payments to banks, whilst banks and other deposit takers deduct tax from their interest payments.
So, when banks anticipate future bad debts by making provisions for future losses, their profits are written down too and they don't have to pay tax on the interest payments they've received. At least not until the economic crisis has passed.
Had Ireland followed the UK practice of re-capitalising Banks in exchange for shares, they'd be in a better position. But they 'know best' and didn't follow the UK example.
Moreover, Ireland has set lower taxes for years on the footing that there was a civil war in the North that warranted being classed as an 'Objective 1' area with huge EU subsidies. When the subsideies were removed, taxes weren't enough to cover the shortfalls.
What the EU should insist on is equity shares in Irish Banks in exchange for support.

Keeping Corporation Tax the same whilst reducing the minimum wage looks like a hard sell to the public, whatever the economic arguments.

The Irish Govt has announced their proposed cuts but will they get them through Parliament and what will be the political fall out for the Govt? They are expected to lose power early next year and what will their successors do? Will they implement these cuts? And even if they get the cuts through, what effect will they have in cutting the deficit?

My feeling is that the cuts will not work (a) because debt and debt interest will accummulate at an even faster rate and (b) the economy will contract. Hasn't that been happenning in Greece since their bail out?

Euroland is lurching from one large bailout to another, with each one bigger than the last.

"Ireland's four-year recovery plan" is the title of Stephanie Flanders blog.

Ultimately, this has little to do with ordinary Irish people any more than it has to do with all ordinary people across the European Union.

It would be more helpful if journalists, especially the most vociferous, if they pulled in their blasted horns and focussed on some good news for a change??? Nope, that's too much to ask as they are all in it together.

Very surprised if this post gets published.

I feel so very sorry for Ireland - lovely place, lovely people.
I was there only a few months ago and in parts it was like being in the Third World. Evidence of huge amounts of EC money that has been spent without thought or care and now wasted.
I'm not an economist, nor a politician, but the banks seem to be at the root of the problem. Rather than pouring money in to bail them out, would it not make sense to nationalise them, take control and behave sensibly and carefully. It's not just Ireland but all banks seem incapable of managing themselves responsibly.

The ordinary working people of Eire voted for their politicians, voted to join the EU and the Euro and then voted again to accept the Lisbon Treaty because they enjoyed a massive influx of free cash on the back of EU subsidies – paid for of course by German and British net contributions into the EU.

The people of Eire accepted every single cheap loan offered by their bankers and took each and every free Euro offered by the EU for 'reconstruction'. I don't remember a single Eire person or business reported as refusing a cheap loan or the free public services that were paid for by those loans and subsidies.

As one of their trade union leaders has just said “The day of reckoning is here.”

IT NOT ENOUGH

The figures still don't add up. Even with these cuts (and remember they are on top of the ones already undertaken) the odds are that Ireland will not be able to repay. We have already seen that the opposition parites in Ireland want an election and have a strong chance of winning. So, will this budget ever be enacted?

The Irish may want to retain their Corporate Tax levels but is that really acceptable to the EU and IMF? What statements have they made on this issue?

If I were Spanish, Portugese or Italian then I would start getting very worried right now!

3.4% 3.9% 4.4% 4.7% "Baseline interest rate assumption for Ireland on their general govt debt 2011 - 14....are these credible whether they use their cash reserves or otherwise. Will the EU/IMF be charging these rates or anything close?

I do not have access to the 4 year plan but I doubt it is a very revealing document in terms of actual strategy, what if scenarios analysis, how Ireland fits into the global position, where it sees itself in the future etc etc. If I were the Irish I would forget about education in the classroom sense, bulldoze all the commercial property lying empty and turn it back into farmland and teach young people how to work the land again - far healthier and much more rewarding spiritually and we'll need the food soon.

I would further note that most strategies require good communication for them to be carried out in the right way.

It is rather interesting that no-one in authority is really setting out 'the plan'; more they are providing a solution to today's problem - this point refers both to Ireland, the wider EU, the UK and US.

There is some 'nod' towards problems that may occur tomorrow eg Portugal but little discussion of how this fits into an overall strategy.

Whilst many people will say there is no strategy I do not believe that the future is not being discussed - however there is something in the future plan that is so unpalatable that we are not being told what it is.
This worries me.

I have often found that once the truth is spoken (however unwelcome)it can be dealt with in a far better way - I await the truth, not from some blogger but from a senior politician in power.

Utterly unworkable, there will be civil unrest,but then that is the problem with compound debt, once it has taken hold, it is nigh on impossible to reduce it.

Their economy was a sham, but then this is the case the world over. We have all lived on the never never, believing that we could literally grow money on trees.

The Government's plans will merely accelerate the decline. Cutting jobs, spending and raising taxes, which on the face of it, seems to help remedy the problem will only lead to less discretionary spending and so impact upon the private sector leading to even more job losses, higher welfare payments etc.

The problem with all these austerity plans is that they assume that the private sector will somehow, and of their own volition, take up the slack. But, this depends on demand. Problem is there ain't gonna be any domestically because this has to be paid off, unless, of course, you turn on the credit taps and force people to borrow, which would just take them straight back to square one. Alternatively, they could hope that their exports expand rapidly, but this is unlikely given that many of their trading partners are in the same mess!

The public won't stomach it. All that will happen is that the cost of living will rise, discretionary spending will fall, leading to more businesses going under and unemployment snowballing, more housing defaults etc. Welfare payments will rise, thus increasing rather than decreasing the deficit.

I am concerned that we are in a hole but "still digging" as far as solving the Irish Debt problem. This debt problem is part of a global debt problem caused by the credit crunch.

Such measures with poorer countries been picked on one by one (many people think Portugal and Spain could follow Ireland) could create a worldwide depression akin to the 1930s or worse. What is needed is international action to make the markets work again and get money back in the system again from a few very rich creditors who have sucked the system dry

The best and only way to do this (that I am aware of) is to implement a "tobin" or "robin hood" tax on all financial transactions. This will be a microscopic portion eg 0.1% of every transaction which would raise billions and help pay off debts globally. This would need international consensus but if it had the support of the largest economies (US, EU, Japan) , I believe it could be pushed through.

Stephanie, the Health Service Executive (HSE) was set up in 2005 replacing 10 local health boards. Since then there have been virtually no redundancies despite widespread duplication of admin staff, and as such there is still plenty of scope for staff reductions even after the current programme advertising 5,000 voluntary redundancies by the end of this year.

To be honest much of the plan to me smacks of common sense. The introduction of water charges will focus minds similarly to the overuse of that resource. The rise of VAT was inevitable as it will mean everyone will make a contribution. The reduction in the minimum wage had to happen to stimulate new employment.


Finally, a pedantic point - To Paul in post 12 (and indeed anyone else) one plea - My country's name is IRELAND and not Eire when referring to it in the English language. Eire is only used if conversing in the Irish language - something I doubt will be happening here!!

The Low Corporation Tax is a cornerstone of Irish Economic Policy - it has its basis in a historically rural society with little indigenous industrial production; if you look at the Ireland of the 80s, this should make this easier to see. Very few irish people - including myself - would be in favour of a change to this situation, as it is a key factor in bringing multinationals such as Google, Intel, Yahoo, Facebook to Ireland. Other countries may be 'jealous' of this situation, but it is not from a position of strength - without the inward investment of these multinationals, the Irish economy would go down the toilet - & b/c of the EU - we wouldn't be going alone...

Nothing like detailed analysis there in item 12!!! Just remember that Ireland is one of Britain's largest trading partners...
If the irish economy collapses, there will be a huge cost to the UK economy.
Also, note that many of our citizens work in the UK, spending on goods & services in the UK & paying taxes in the UK - including my two sisters.
An Island mentality may sound clever/appropriate, but when that point of view is subjected to any form of detailed analysis, it is revealed to be exactly what it is: empty rhetoric - which hasn't had any basis in reality for well over a decade.

The Irish Cabinet is meeting to finalise its four-year recovery plan for the economy. A 160-page document delineates how Ireland will reduce its spending €15B between now & the end of 2014.
Meanwhile the IMF & EU Officials continue their audit of Ireland's financial state.
On the question of Ireland's low corporation tax, Swedish PM Mr. Reinfeldt said: "It's a decision for the Irish people and government to take."
The European Commission warned that the Irish €15 billion four-year economic plan is subject to “thorough assessment”. The European authorities and the IMF are working on the basis that they will receive a request for emergency aid from the Government next week, after the plan is officially released. There is a seperate plan for restructuring the banking sector (to be finalised over the weekend).
Irish Governmental officials said that the publication of the 160-page document had been brought forward so that the public would realize that the plan originated from the Irish Government, and not from the IMF, the ECB or the European Commission. The document clearly reaffirms the Government commitment to retain the 12.5 per cent corporation tax.
Fine Gael leader Enda Kenny and Labour Party leader Eamon Gilmore are still calling for a snap election saying the Coalition had lost the authority to govern.
Ireland is set to be a prime topic at an EU-US summit this evening in Brussels (when Barack Obama meets commission chief José Manuel Barroso and European Council president Herman Van Rompuy.)
Why are the Americans sticking their nose into the EU?
Irish borrowing costs spiked again yesterday when it emerged that AIB has lost about €13 billion in deposits since the start of the year.
US traders have been short-selling AIB stock in record volumes; US traders have also been betting on the bank's nationalisation. (With friends like these...)
AIB shares plummeted almost 20pc in Dublin yesterday and were down by almost 18pc in early New York trading. The Irish regulator has a ban on shorting Irish bank shares listed in Dublin, but the ban does not cover shares trading on the New York Stock Exchange. Maybe, the Americans are sticking their noses in the EU to apologize...
Short selling is a trading strategy where investors can profit from FALLING stocks. The most common way for an investor to 'short' a stock is to borrow shares, sell them in the market in THE HOPE THAT THE PRICE WILL FALL. The investor can then buy the shares back, return them to their original owners, pocketing the profit.
I ask again, what is the US doing sticking its nose into the EU?

It is manifestly unfair that the most vulnerable in Societies are hit when Governments fail to regulate their economies. I understand that it is necessary to underwrite the banks as the alternative is another Great Depression, with banks and businesses going out of business across the board, pension funds defaulting too. However it should be the Governments first duty to ensure that the Banks can never again hold whole societies to ransom as they have done, and regardless where bankers determine to do their business in the future to make their immoral bonus culture illegal. All Societies in the World over are reeling from the greed of the financial institutions and it is surely in their Government's best insterest to regulate bankers remuneration over and above a base salary which can still be kept competitive. Bonuses are designed to be rewards which are self financing, how can banks reporting billions in losses possibly justify paying their managers at any level bonuses. They wanted to be in both retail and investment businesses so bonuses should come from the collective realised profits not paper returns on loans which would in any event take decades to recover in real profits.

And will the bosses come out smelling of roses as in the UK? Will their wages be docked? their bonuses banished? and will their generosity to themselves be hindered? and will they stop getting gigantic portions of free shares in the goodie bag. If yes to the above please let Dave and the Boy GEorge know where they are going wrong.

The real lesson from all this is...

1. Anything too big to fail must be nationalised without compensation

2 Anything not too big to fail must be allowed to do so

Bailout in 2008 removed the banks only 'natural predator' - the market.

We have not moved forward.

No mention of the banks in the plan.
The growth figures are a fairytale.
The total borrowings (2010 onwards for bailing out the banks, repaying bank bondholers etc) from existing Govt. Bonds, ECB, IMF, UK, Sweden etc will be circa €250 billion to €300 billion.
It will not be possible for a small country to servicing this debt.
Ireland cannot carry the bank related debt.

Sounds like it's going to be pretty tough for the next few years, but Ireland is still exporting and with low corporation tax and surplus manpower could attract inward investment.

A common theme of both the Irish & UK problems is the apparent spend, spend policy when times were good rather than reducing national debt. Benefits were increased beyond what the economy could sustainably afford so they've got to be reined back in. If they hadn't been given in the first place it wouldn't be as painful and the surplus cash could have been used to bail out their own economy/banks.

#20 Oirish - the problem with your reasoning is that the bullet should not be bitten because it will hurt us - this has been the problem all along - well before the crash when nothing was done to stop the bubble growing - everybody wants everything to be fine and dandy and never give bad news and it is just no way to run an economy.

If the way to deal with the Irish crisis is for Ireland to default then that should be allowed to happen. If the knock on effect is the UK has to default then that should happen too - but the current 'plan' of Country A has run out of money lets all club together and lend Country A some more money has no future.

We are already at Country B and C,D and E are waiting in the wings with F (us) looking on with a worried frown.

Most of the measures seem reasonably sensible, but I don't see the logic of rolling out water charges or a new property tax.
The mechanisms to account for and collect these taxes will surely cost much more, especially in the short-term, than the gathered taxes themselves.

Particularly in the case of water charges - that will require the acquisition, installation and maintenance of water meters in _every building_, permanent staff manning a call centre, expensive consultants to implement a database and web system (this last item has been frighteningly costly, especially given the quality of the result), paper billing etc.
Surely this is a "spending a pound to save a penny" situation, especially since they cannot justify excessive charges (because it's equivalent to a tax on the poor).

On the other hand, as mentioned in other comments, the HSE and other public sector departments are over-staffed and mired in unnecessary bureaucracy as a result (perhaps often to justify and maintain their over-staffing and inflated budgets).

Honestly though, what would have happened if we had never bailed out the banks? Could it be worse than what's happening now?

Its going to be tough for all...

But if the country wants to take the bankers debts on , it has no choice. I believe the Irish economy will revive again , but like the UK it will take a decade to pay the debts down.

Ideally governments should be aiming for ZERO debt and public sector no bigger than 35% of GDP. Thus when problems occur additional borrowing can be arranged for a temp basis.

Impossible ? No , just requires politicians who don't think every increasing spending is the cure to societies problems.

Firstly it is very frustrating listening to the constant negativity about the Irish economy and also the inaccurate points and assumptions by journalists and by people in the UK. Yes we all get that British people are by the whole euro sceptic but to suggest that Ireland was just filled with money from German and British tax payers is ridiculous. Yes there were grants for infrastructure which ended 4 years ago. Allot of what was allocated however was not used and drawn down by the Irish state however and most of Ireland's brand new infrastructure was paid for by the Irish taxpayer.
Ireland is now a net contributor to the EU. Ireland has one of the largest fishing grounds in the EU which it has been calculated the sharing of with the rest of the EU has been more of a loss of revenue to Ireland than all grants received from the EU.

Now onto the economy. Ireland got itself into it's own mess from 2002 on. The country was obsessed with money and property, salaries and inflation spiraled out of control resulting in a massive loss of competitiveness for a export dependent nation. Something had to give and it did in glorious style.
The 4 year budget is effectively returning Ireland back to a competitive stance. Ireland's civil servants are the highest paid in the world. Standards of living for those in employment are extremely high by any standard. Unemployment benefits would be a wish come true for those in Britian standing at 196 euro a week plus rent benefits. minimum wage is hitting nearly 9 euro at the moment.
The budget talks of moving Ireland back to levels of tax and social welfare in 2006. In that year the economist magazine named Ireland has having the best overall living standards in the world.
Lets put this into perspective here. Ireland's economy is fundamentally strong.
One of the highest educated workforce in the world, more master graduates per head of population than any other country. An excellent environment for starting and doing business. excellent infrastructure. low corporation rates. the EURO, yes that is actually a strength as well as a weakness. A relationship with the US unrivaled in Europe and attracting the vast bulk of American direct investment into Europe. Within 4 years the Irish economy will have removed the fat of the greed that gripped the nation and this tiger will be ready to roar once again.

The Irish have spent way beyond their means.

They massively increased spending, social security, pensions and so on. And they reduced taxes greatly. How was that ever going to work?

They then guaranteed their (private) banks debts. More spending. And since joining the Euro have encouraged reckless borrowing with very low interest rates.

They are now procrastinating with relatively SMALL changes, such as reducing the minimum wage by one Euro. One! Don't they realise they have gone bust?

The sooner they write off the losses, reduce spending much further and increase taxes much more, the better off they will be in the long term.

Post 12 Paul.

Spot on.
The Irish were quite happy to take massive EU subsidies, and live the high life with more Helicopters per capita than anywhere else in the world.

It did'nt bother them that they were building more houses with borrowed money than they had people to put in them.
And how on earth could they claim a subsidy for terrrorism in Northern Ireland ?.
There is something not quite right about the EU and the way it has thrown around other peoples money, we all know that.

This is largely a problem created by the incompetence of the EU itself not individual nations, something needs to be done to fix the EU or else there will never be a solution.

30. At 5:22pm on 24 Nov 2010, Barry
Way to go Barry and next time you'll know where the pitfalls are. Keep an eye on those politicians.

And don't demolish those houses.

@15 Grimupnorth77 wrote:
"I have often found that once the truth is spoken (however unwelcome)it can be dealt with in a far better way - I await the truth, not from some blogger but from a senior politician in power."

My guess is that all the western nations know that they'll end up defaulting. All this "borrowed bailout" just makes getting out of the hole all the more impossible, but I suspect it was impossible from the start.

My personal suspicion is that no-one wants to be first to default. They want other nations to go off the cliff first.

All this "action" is just window dressing. All the governments know that default is the only real option but none of them want to be the first to talk about it. They're going to wait and hope that some other government is going to be forced to speak the unspeakable... that way they can say "it's not our fault - we were on track until [insert-nation-name-here] defaulted, now we have to do the same."

In amongst all this informed opinion I feel slightly naive asking where exactly all these loans actually originally come from - but I'm going to do it anyway!!!
Banks and governments seem to have borrowed massive amounts from somewhere and then are borrowing more to pay off the first lot. Seems to me we need to follow back the trail of money to its origins. And they are where exactly? 'cos I want to invest my pension in those institutions !!!

I have great sympathy for the average Irish citizen who was for the most parn NOT responsible for the mess they are now in. And it is good to see from the comments here, that people are starting to understand that the ECB & IMF are providing a `bail out` of the banks purely out of self interest and to help their friends in the upper echelons of the international banking community. The Irish people are being handed the bill.

The truth is that all the european countries and the USA have indulged in a decade of exponential credit expansion. The Banks have proffited spectacularly and the governments have enjoyed the taxes that the banks have paid. The interconect between government and banking has become far to mutually beneficial to be healthy.

The credit expansion has left many with debts that they can not service and houses that they bought at credit bubble prices. While bank bond holders are insulated from the poor lending descisions that banks made we can be sure this will happen again....and again.

At the heart of this is the fractional reserve banking system itself. Until we greatly reduce the leverage that banks can use they will be able to hold a gun to the heads of the political class, and the taxpayers and savers will be made to take their losses for them.

We need MUCH smaller banks and MUCH smaller government. Only that way can `stability` and sustainability become economic realities.

The 3% growth in the 4yr plan is a joke.

Full scale sovereign default within 12 months.

The IMF are vultures in suits - the ultimate `banksters`

Our Irish friends on this blog seem to be in denial. They have been led by idiots into this current mess and the plan put forward by their lamentable Govt is NOT a plan to save Ireland but one that will drag them into recession and even deeper debt. Just how is Ireland going to service the debt? Ireland is bankrupt.

One blogger from Ireland said the Euro is both a strength and a weakness. In what ways is it a strength? The Euro is vastly overvalued for the needs of the Irish economy and that makes their exports uncompetitive. The Euro means that Ireland cannot employ monetary methods to combat their economic woes, unlike Great Britain.

When Ireland joined the Euro they surrendered their sovereignty and put their monetary policy in the hands of strangers in the ECB who had absolutley no interest in setting interest rates that met the needs of the Irish economy. Yet even now they don't seem to realise the enormity of that mistake and how membership of the Euro plus Govt failures to regulate lending led to the false boom and bust they are currently experiencing.

bluepc1951

Have a Google for `fractional reserve banking` and `crdit creation`

you will find some articles that will help you to understand how banks can lend out £100 (and a lot more than that via derivatives) for every £10 that their customers deposit with them.

Once you start to understand how profitable that is in good times you will appreciate how addictive it is!

The problem is that only a very small percentage of loans going bad can wipe out ALL the money deposited in the bank by its customers.

Borrowed prosperity comes at a price. One wonders, though, just what Germany will want for their money. It doesn't feel good. It looks bad.

So currently the Irish do not pay any income tax unless they earn over £15k for a single person up to £27k for a family, no wonder their government are broke.
Like Greece, Portugal, Spain and the UK, Ireland spent far more than it was earning for years by borrowing the money and surprise surprise the lenders want their money back.

Stephanie Flanders "Irelands 4-year recovery" blog,

Post 35 @ 6:43 on 24 Nov - 'bluepc1951'.

Any financial genius answers to that?

re.#4. At 3:16pm on 24 Nov 2010, moreram wrote:
"So ultimately wealthy investors make money while ordinary working people lose their jobs. Capitalism doesn't work for the vast majority of people and needs to be changed!"

Change the system to get rid of wealthy investors and then who pays the taxes for health care, education, social welfare and all the other nice to have things that people have become dependent on government to provide? Will ordinary people be any happier paying the full cost of those amenities themselves instead of through high tax rates on the wealthy? And if capitalism is replaced with some other form of "ism" will that be as effective at creating the wealth needed to support the current general standard of living of the populace?

Not defending the wealthy, just pointing out the need to consider the consequences before you abolish the current economic system.

As always; its the poor who pay, and pay and pay and pay. Enough, surely?

re.#36. At 6:45pm on 24 Nov 2010, PRELOAD wrote:
"The truth is that all the european countries and the USA have indulged in a decade of exponential credit expansion. The Banks have proffited spectacularly and the governments have enjoyed the taxes that the banks have paid. The interconect between government and banking has become far to mutually beneficial to be healthy.

The credit expansion has left many with debts that they can not service and houses that they bought at credit bubble prices. While bank bond holders are insulated from the poor lending descisions that banks made we can be sure this will happen again....and again.

At the heart of this is the fractional reserve banking system itself. Until we greatly reduce the leverage that banks can use they will be able to hold a gun to the heads of the political class, and the taxpayers and savers will be made to take their losses for them.

We need MUCH smaller banks and MUCH smaller government. Only that way can `stability` and sustainability become economic realities."


Well said. The difficulty in doing that of course is that at the same time the banks were working to expand the number of people indebted to them government was working equally hard to expand the number of people dependent upon it. Those people, whether dependent on it for health care, welfare, pensions, direct employment or business contracts, form a formidable resistance group to any attempt to downsize government. It may take a complete collapse of the current economic system to overcome the large number of people with a vested interest in maintaining the status quo at any cost.

Isn't the reality of this so called rescue package just a desperate attempt by euro fanatics to protect the euro at any cost? Smoke and mirrors operated by the ECB and related organisations. Soon a similar rescue will be required for; Portugal, Spain, Italy and maybe Belgium. Greece is likely to breach (in reality already has)the terms of its existing bailout and so will need further funding and the money just does not exist. The ECB and IMF are reliant on funds (aka credit worthiness) from the very countries who are already overly indebted, so this support is no more than a Madoff sytle ponzi scheme and the markets realised this long ago. Countries particularly the smaller ones would be better off defaulting on their debt, negotiating a much better deal with euroland and spreading the problem that way. Maybe even a return to the punt (V2) for Ireland or at least the threat of that. A much more honest and realistic approach to the problem and in my view in the longer term a better solution. Let the banks and other investors take their medicine and have major haircuts thus sharing the problem! Then lets get on with life even though we will all (but bankers included) be proportionetely worse off. Maybe then we can create a culture and attitudes to compete with the likes of India and China because unless we do then its only a matter of time before we are in the proverbial paddy fields and they will be driving all the Rollers and probably making them.

35. At 6:43pm on 24 Nov 2010, bluepc1951 wrote:

"Banks and governments seem to have borrowed massive amounts from somewhere and then are borrowing more to pay off the first lot. Seems to me we need to follow back the trail of money to its origins. And they are where exactly?"


OK, here goes:

BANK A lends to

BANK B, which lends to

BANK C, which lends to.....

BANK A

Get the picture now?

Except it's much, much worse than this....

Because of FRB even in this little example the money supply has already been expanded by around 170% (each bank only having to keep 10% of its deposits.

Except it's much, much worse than this.....

Banks haven't even been keeping 10% reserves, Lehmans only had 2.5%....(40x leverage).

Scared yet?

For once, I am genuinely confused.

Surely, if you have a welfare and benefits system, nobody is required to starve, be homeless, not have access to medical care and to have no money on which to subsist.

Putting public servants out of work, however cynical one might be about the value of the jobs they do, amounts to nothing more than taking people who are paid to work and turning them into people who are paid not to work. The figures might be different but the effect is the same.

Or am I wrong?

I have been looking at where best to invest a one year savings bond that has just matured. I looked at the best saving rates on the web and found that the Post Office (British) are offering a good rate. However, when I read who were providing this service to the Post Office I had to laugh - it is Bank of Ireland.

Why on earth are the British Post Office using what is effectively a "foreign bank" to provide a service. I suppose the Icelandic banks wold not talk to them.

Interesting that Ireland have protected a different element to the UK. Perhaps they're seeing that education and change are drivers of future growth.

Suppose a big question is: does Irish healthcare make a good JV / other investment vehicle for the private sector - and would the private sector invest?

Any comments as to whether any part of the bailout had actually been budgeted for to any extent? Given that the Eurozone has been under pressure for some time, it'd have made fiscal sense to have a contingency plan.

The real shame in this is that economists saw this coming before it was set up.

46. At 7:27pm on 24 Nov 2010, the_fatcat wrote:

Had mentioned the dark arts of lending before. Bottom line is noone actually knows who holds the largest part of the can. A Government defualt in the Eurozone however, would make Lehman look like dropping a cent in the great depression in the current climate.

47 threnodio_II

The figures are different, quite a bit different. There is also no padded pension, no holiday pay etc etc. They can even be used for work experience voluntary work etc etc. The objective is to reduce the budget, squeeze exoectations, blur boundaries.

Can we assume that all those reckless, untrustworthy, irresponsible bankers will now also be paid minimum wages? Their bonus should be confiscated to help pay back the debt.

Shame on them, its an utter disgrace than not one of them anywhere in the world has been bought to book for these heinous crimes.

As usual those lowest in society, those who are unable to fight back are having to take even more pain, whilst these perpetrators and traitors carry one and reep the rewards of their incompetence.

Why are the politicians perpared to take the flack for these people?

Why are they so untouchable across the world?

Never mind (anymore!!!!)about plucky little Ireland Stephanie,where are your "economic insights" with regard to the American hellstorm described thus by Zerohedge:

https://www.zerohedge.com/article/celebrate-end-recession-small-businesses-are-cancelling-christmas-parties-more-ever


"When reading the otherwise rosy stories in the mainstream media, the most glaringly simplistic and attention grabbing subsegments of which continue to proclaim the recession over, while conveniently ignoring that despite $4 trillion in monetary and fiscal stimuli underemployment is at 17%, foodstamp recipients are at all time highs (but who cares about that social stratum), discretionary purchases are continuing to be funded primarily from millions of delinquent homeowners who refuse to pay their mortgage (now on average between 18 and 24 months behind), companies are refusing to hire, capex spending is at all time lows, banks are hoarding cash for the imminent perfect MBS putback storm, commodity price inflation is threatening to collapse profit and net income margins, half of Europe is locked out from capital markets, rampant Chinese inflation is threatening to recreate Tianenman square, investors are pulling cash from markets for 29 weeks in a row, hardship withdrawals from 401(k)s surging, and the muni mess is one political decision from an avalanche of city and state defaults......"


Remember this Stephanie?:

https://bbc.kongjiang.org/www.bbc.co.uk/blogs/thereporters/stephanieflanders/2010/09/people_power.html

"But there are two reasons to think that the smart money will sooner or later return to the US."

24. At 4:55pm on 24 Nov 2010, Richard Dingle wrote:
The real lesson from all this is...
1. Anything too big to fail must be nationalised without compensation
2 Anything not too big to fail must be allowed to do so


I used to go along with the 'too big to fail' statement.
But not anymore.

Nothings too big to fail.
Not individuals, not companies, not banks and not countries.
Not anything we create.

"Putting public servants out of work, however cynical one might be about the value of the jobs they do, amounts to nothing more than taking people who are paid to work and turning them into people who are paid not to work. The figures might be different but the effect is the same.

Or am I wrong?"

You are not wrong but your emphasis is. "The figures might be different". Ok - say I'm your landlord. I got the property buy-to-let using a self-cert (liar loan). I charge you £500 a month. I put it up to £2000 a month. It's a different figure but the principle is the same. That ok with you?

Ok that's me outta here. I'm going to learn something as I feel grubby after writing that.

The infrastructure for the movement of money and conditions is in dire need of restructuring. The present day Ponzi scheme for world finances is an unworkable labyrinth. Currencies with no intrinsic value are constantly proped up from crisis to crisis.

There is no political will anywhere to identify and deal with the culprits as it involves changing the status quo. The general approach is to sweep problems under the carpet... and get a thicker carpet when the lumps show!

Jon
Vancouver, BC

I'm a bit out of step, probably, with my thinking, but isn't it all an unintended consequence (or, may it be an intended one) of "Limints on growth"? (for the younger ones - Club of Rome report initiated in 68'). Didn't we, then, sealed our faith, deciding rather to stall growth around us than to ride the wave that was there and then (anybody remember rates of growth in Africa then?). It transpires now, that one cannot cover this "green shoots" of Asian growth and they don't think that much of any limits (3 billions of them) as our once "golden" billion does. Even if it was right to proclaim this manifesto of self limitation, it certainly played out the wrong way. The acute awareness of limits, real or imaginary, might have had been one of the reasons of "I want it all, here and now!" mentality emerging with such a strength. It is to be seen easily now, but it started in the "higher echelones" much earlier and descended into the masses only with time passing. We don't have an idea, not even a common narrative to lead us through it...
The last sentence in Not Buzz Windrip's comment @ 50 provoked this thoughts

The Irish government continue to insult the people of Ireland by regarding its borders as an economic zone for the wealthy while regarding the people who live there as an inconvenient drain on state resources. There will be blood on the streets, especially when the state pension fund is used in a desperate attempt to prevent AIB from going bust.
Default and refloating the punt is the only way out of this.

Calling this a recovery plan is an insult to everyones' intelligence.

We are told that austerity is necessary to appease the markets. But what is the market's reaction to this latest plan? Negative, just like it's reaction to earlier cuts. The interest rate on 10 year Irish bonds has gone up to a new record level.

Perhaps market traders, like everybody else who thinks for themselves and does not blindly accept political spin, realise that recovery will at best be delayed by these measures. The Irish government, let alone the Irish banks, will not be able to pay down their debts until recovery is complete. The market appears to take the view that with the proposed measures, this might take more than 10 years, hence the the risk of default on 10 year bonds has increased.

Failure, loss etc is part of the natural economic cycle ... we are too protective of what is not working.

What is needed is managed failures and reconstructions and eliminations of bad banks and creation of new ones with a better culture, business ethos etc.

This is the overall lesson that is not being learned anywhere in relation to corprorate finances and crises ... its concerns constitutional rights - v - privileges and until this is addressed ... we have years and years of economic stagnation in Eire/UK/Europe and beyond. This enables the markets/business/industry to get going again with new entrants and opportunities and private risk calculation failures become private losses for the big creditors and debtors ... and not public sector/taxpayer losses.

It's only money ... the present arrangements are protecting those who can afford the losses and kicking those who can't afford any loss out of their homes and jobs.

No where in Adam Smith's literature or any free market literature does it say that those who gamble and lose should be propped up and compensated by the taxpayers and stakeholders and also be given several years to recover under protection of massive bail-outs.

Ironically, it is not the markets that are failing it is society that is not letting the failures take their course as the free market will find a new market solution to build on. This is a bizarre situation that is over-looked by most if not all ... 'economists'.

We need to manage failures in terms of strategic economic management and achieve change and move-on ... because the failure to do so is creating additional and longer term uncertainty and is spooking the markets and is making things worse ... in terms of 'stagnation'.

Managing failure of Lenders (including their shareholders)and borrowers as risk takers, means that holders of owner occupied residential mortgages should be given more security than those holding bad loans on e.g. buy to let and commercial property loans (and 'yes' ... some lenders are in fact doing this ... much to their 'credit') as their are ethical and moral issues to be considered in the wider political economy.

The lessons are not being learnt ... in fact hardly anyone has even started thinking strategically about what is and is not the underlying issue of the ongoing financial crises.

The starting point is constitutional and sovereign rights and privileges and in the UK this means creating a new fully elected House of the Constitution (to replace e.g. the House of Lords), to properly consider
the matter and break the policy, legal, strategy impassse that is slowly bringing many things in our economy to a grinding halt.

We need 'new money' and a new relationship with money and all those who use it. Most of our politicians are not up to the job ... they cannot deal with these issues as they are restrained by to many all powerful vested interests.

Think outside of the box!

Go on go on go on go on.

Argh go on

Go on go on go on go on.

It made me laugh

In all seriousness one can't help feeling that we are all being screwed by the man. What would really happen if we let the banks collapse. We the taxpayer are spending money to support a worthless system.

Capitalism is not free, there are rules and regulations. Therefore what is the difference between China and the IMF/EU?

Busby 2 wrote:-

One blogger from Ireland said the Euro is both a strength and a weakness. In what ways is it a strength? The Euro is vastly overvalued for the needs of the Irish economy and that makes their exports uncompetitive.
______________________________

There's only one thing holding the Euro at it's historically unrealistic level and that's the German economy, backed by German Gold reserves, which are one of the biggest in the world.

The Irish would be far better off outside the euro, along with the other Pigs. I can't see this all ending in anything but tears.

Either that or Germany should pull out, the Euro would then re-value to a level more in keeping with the general Eurozone economy.


If I were the government in waiting I'd be quite happy to keep on waiting for another year or so and let this lot take 'all' the blame. Because sure as eggs are eggs this will come back and bite them.

Why on earth are the British Post Office using what is effectively a "foreign bank" to provide a service. I suppose the Icelandic banks wold not talk to them
__________________________________

Security..
Because the Irish Govt were very quick to jump to the aid of this bank 2 years ago when they were in serious trouble, and offer guarantees exceeeding that of the UK Boe.
They were regarded as pretty solid, though it was pointed out by economists at the time that the Irish govt did'nt have the money.
The Bank also offered higher interest on bonds than most Uk banks, which attracted more money and has no doubt delayed the demise.

All we need now is for a few million UK Post office savers to suddenly ask for their money back. I'll bet they have'nt got it.

#59 nautonier,

I truly understand the drift of your argument and in many ways you are right. However, the vested interests - financial and political - will make common cause to ensure that it does not happen.

At the same time, we are seeing no organised attempt to develop a viable alternative. Where is the forum pushing for a Constitution (a pre-requisit for am elected Upper House)? Where are the open discussions from Labour to present an alternative social and economic strategy?

I would far rather see evolution but I fear that in Europe we will end up with revolution. Anarchy (in the general use of the term) will result as the revolt will have no clear positive objective.

Time is running out and we haven't even addressed what nationhood, society and the economy is all about. However, I don't see any other country addressing the problem either.

64. At 10:37pm on 24 Nov 2010, Arrrgh wrote:
In all seriousness one can't help feeling that we are all being screwed by the man. What would really happen if we let the banks collapse. We the taxpayer are spending money to support a worthless system.

I agree with you. However, if Fred Goodwin's house suffered broken windows I fear that if banks were allowed to collapse and depositors were thus allowed to lose their savings - heck, if it was to happen the day after pay day and the bank's customers lost just their last months wages - we might find bankers being hanged from lamp posts.

I don't know if that's the reason banks are not allowed to fail and it's a big 'if' but can anyone categorically say that wouldn't happen if high street banks started to collapse. I certainly don't want to see it or have it on my conscience. What I am saying is that it is more than just money at stake.

7th December is take you money out of the Banks day. Watch the governments fall.

40. At 7:09pm on 24 Nov 2010, Keith wrote:

So currently the Irish do not pay any income tax unless they earn over £15k for a single person up to £27k for a family, no wonder their government are broke.
_________________________________________________-

That's not the worst of it, theie unemployment benefit is almost 200 euros a week, makes hardly an incentive to find any work - or sell your helicopter.

GRIMUPNORTH WROTE:-

I have often found that once the truth is spoken (however unwelcome)it can be dealt with in a far better way - I await the truth, not from some blogger but from a senior politician in power.
_________________________________

A wise decision, their honesty is or course beyond repute.
An alternative would be a frontal lobotomy.

Shoplifters of the world unite and take over.

I'm sorry but Ireland is totally screwed.There is no recovery from this if there is any attempt to pay off the crooks in the banks that caused this situation. Irish people on the the minimum wage are taking a pay cut to allow the bankers to carry on paying themselves the same bonuses as before the start of the crash. The banks just played past the parcel with a debt bubble knowing that even whe it popped the banks left holding the tabs just get bailed out by the poorist in society. These bankers should not be able to sleep at night but I know it doesn't even impact on them at all.

Who are we to advise a country rich in ........hang on I'll get there soon....... celtic tigers.

#29. Ideally governments should be aiming for ZERO debt and public sector no bigger than 35% of GDP. Thus when problems occur additional borrowing can be arranged for a temp basis.

Impossible ? No , just requires politicians who don't think every increasing spending is the cure to societies problems.

Unfortunately it isn't that easy. If our government tried to wind back our debt, by running a permanent surplus, we would be in massive depression. Simply because money is debt. They are the same thing. You get rid of the debt and you get rid of money.

The whole system is designed to enslave the ignorant.

I read today that the new league tables are going to require the reporting of the numbers who have reached 5 (only 5) proper GCSE qualifications (including Maths, English, one Science, a language, History or Geography).... and currently only 15% achieve this. You realise how easy it is to fool so many of the UK population. This also means that even a large percentage of our university students do not have 5 GCSEs passes in "robust" subjects.

Stephanie, I was very disappointed that you didn't press the Irish finance minister more when you interviewed him, asking if he had regretted the decision to 100% support the banks. You didn't even ask him how he could justify enslaving the younger population just for the sake of putting back bankruptcy by a maximum of 3 years.

#37 busby2
The euro is a strength for Ireland in the sense it is a large relatively stable currency compared to the old Irish punt. Ireland probably would have experienced a run on its currency by now assuming the same situation. Even if Ireland still had the punt the country could still have ended up in the same situation. The government still had fiscal control and some regulatory control over its banks. Interest rates although very important when controlling freedom of credit they are not the governments only option. The blame lies with the Irish government for not using the powers it had to tackle the property bubble. For example the amount of zoning for housing was in some cases crazy. i.e some parts of Ireland have enough houses to deal with population growth for the next ten years. Comparing the British pound and punt isn't worth while as the pound is the worlds third largest reserve currency the Irish punt wasn't anywhere that level pre-euro.

And as for Irish exports being uncompetitive I am afraid that doesn't stand up to the facts. In September Irish exports rose by 12% and the economy has a trade surplus. Falling labour costs are having the same effect as a devaluation in currency. It thankfully is a bright spark amid all the gloom and will inevitably help in the long run.

Isn't the Irish problem just a small(ish) example of the European problem? Whilst there are a number of ways of papering over the deficit and debt issues the real problem is the lack of competitiveness? Ok the Irish banks and associated borrowers may have been reckless but they were not alone and were supported by banks and investors from many countries who were eager to ride the Celtic Tiger storm. The solution can only be long term; Labour (and salary) costs have to come down and productivity has to rise for the Irish and the rest of us Europeans to be able to compete on the world stage.

67. At 11:01pm on 24 Nov 2010, foredeckdave wrote:

#59 nautonier,

.............................
FDD

Its a question of politics and who gets the haircuts!

https://www.telegraph.co.uk/finance/financetopics/financialcrisis/8158298/Germany-fuels-EMU-debt-crisis-with-haircut-demands.html

The only way to save the Euro and avoid austerity measures is to give those who can afford it ... haircuts on the risks that they have taken.

I would like to see the Euro crash myself ... but once Euroland politicians realise that giving haircuts to the corporate risk takers avoids some proportion of bail outs and some more painful austerity measures ... there are millions of votes in that ... and the Euro survives.

Impartial my a**e. Looking at the headlines from the site this morning:

"Euro slides on Irish debt fears" - despite it trading at levels still far too strong against the envisaged rate against the dollar. And despite it trading at a stronger position against GBP than only a few weeks back.

"Leaving the euro: how would it work?" - speculative rubbish designed to bolster the idea that this is an outcome that's on the cards.

Combined with these blogs it's a clear one way tirade against the Euro. We're getting tired of it. Despite doom and gloom and Armageddon predicted the Euro has taken on all. One only has to witness the double think used on headlines for the dollar versus the Euro to see the bias.

Dollar value drops versus the Euro "Euro in trouble as smart thinking US boost exports"

Euro drops in value versus the Dollar: "Euro slides, Eurozone in trouble"

Guys, if you're going to try and talk a continent down, good luck to you, I understand you are trying to save your own hides. But please, this is playground stuff. Next headline "PeopleinEuropewhosaywhatsmell"

I am glad to hear you were at the press conference Stephanie although those concerned about costs at the BBC might wonder why you were there when the relevant information is on the internet.

Is there a chance we might get some economic analysis of these moves by Ireland?

24. At 4:55pm on 24 Nov 2010, Richard Dingle wrote:
=========================================================================
I agree with all you said bar one thing, I believe that there is nothing too big to fail. This premise is our and the global economies downfall. For are we trying to stop the extinction of the dinosaurs, if so then we will have to continue to feed them for ever more. For once they have been domesticated they will never return to the wild especially if their habitat has been destroyed.....

78 continued

The Euro is holding up after half a trillion euros stumped up in the last 6 months to shore it up ... this is unsustainable beyond the short term.

There are three moves for the Euro:

1) Crash completely ... Hooray ... take Europe back to Maastrict treaty environment and renegotiate the European project ... Hooray!

2) Massive euro devaluation with certain creditors getting haircuts ... Hooray!

3) Half way house on currency .... each EU member has a mixed money supply of its own sovereign currency and Euros ... strict monetary supply on all Euro currencies

This may be what we actually end up with ... several years down the line ... as a compromise to keep the Lisbon Treaty and save the Euro ... and it does have some interersting potential for EU members:

i) insulating their domestic economies and buying imports in their own currency

ii) 'exporting' in a devalued Euro currency

iii) currency trades between Euro land members determined by the relative strengths of their economies based on assessment by a National Sustainability Index

The bootowm line is that the exchange rate value of the Euro is artificially high and is unsustainable.

Sell those Euros! Crash baby Crash!

#78 nautonier,

It's not a question of haircuts! They are not the solution despite what Merkle thinks.

It's not even a question about the Euro.

It is a question of how we re-establish the dynamic balance between labour (in all its forms), government and capital.

It is a question of trying to answer the fundemental questions of what the state, society and economy are for.


#79 D_I

I cannot defend the headlines - I didn't write them!

I can however defend the posts on this blog both pro and con the Euro. From a UK perspective there are serious questions to be answered in Euroland. We can see that a 'one size fits all' approach without a fiscal union is having potentially fatal consequences for some members.

If you care to look back at other threads there have been as many portents about the demise of the US$. At the moment it would appear that the markets have the 'smell of blood' in their nostrils for the Euro. Perhaps they are looking to see how far they can go before turning their attention on the US?

It's not just the UK that is trying to save our own hides. Every economy in the world is having to look at its economy.

Rather than moan about the points raised try answering them.

The BBC has an article on Leaving the Euro which makes interesting reading.

https://bbc.kongjiang.org/www.bbc.co.uk/news/business-11830532

There is no doubt that the process would be very difficult but that is to be expeted when anyone enters into an agreement where there is no mutual get out clause. I'm a great believer that nobody, least of all your nation, should burn their bridges as that way lies disaster and ruin. Someone else likened membership of the Euro to being trapped in a burning building without any exits.

I believe however that there could be a workable "get out of the Euro exit" cluse for Ireland. It would mean going back to the punt and tying the value to sterling. Such a move would be designed to prevent a flight of capital during the transition. After the transition, economic circumstances would determine whether the punt would remain tied to sterling.

There is a history of the punt being tied to sterling. When the punt floated the value of the punt fell against sterling but not dramatically so.

The Irish need to consider the alternatives because there is every chance that the rescue package simply isn't going to work. The markets reacted by pushing up interest rates on Irish bonds to record levels. Bond prices for Portugese and Spanish bonds also increased and now there is pressure on Belgium. The Euro project is falling apart and Ireland should be planning their exit strategy as they are going to need one!

83. At 09:06am on 25 Nov 2010, foredeckdave wrote:

#78 nautonier,

It's not a question of haircuts! They are not the solution despite what Merkle thinks.
.....................
I don't know for sure as there are different outcomes here... but it may be that option 2 in my no. 82 post is what Euroland politicians 'go for' as 'popularist' amongst voters ... and if so ... 'creditor haircuts' are going to be one of the main topics of conversation for the next few years ... as all the risk takers are made to take on their full risks and rewards.

30. At 5:22pm on 24 Nov 2010, Barry wrote:
=========================================================================
One small thing with your assumption and that is that no other country in the EU will reduce it's corporation tax to that of Ireland or even lower. The politicans in Northern Ireland have been calling for this for some time and with the EU, ECB and IMF seemingly allowing the Irish to maintain their ultra low level it is impossible for them to stop any other country following suit. Only last night I heard two economists calling for their respective countries / region to follow Ireland and reduce their corporation tax. One of the countries was Spain the region was from Eastern Europe. Both have a surplus of well qualified people and both countries have a lower cost of living and general taxation. There is also the fact that as we ourselves have seen the workforce within the EU is now very mobile. So staff would not be a problem. Anyway if you had to choose between Mayo or Madrid which one would you choose?

80. At 08:57am on 25 Nov 2010, LadyEcon wrote:

I am glad to hear you were at the press conference Stephanie although those concerned about costs at the BBC might wonder why you were there when the relevant information is on the internet.

Is there a chance we might get some economic analysis of these moves by Ireland?

......................

Stephanie Flanders ... I think, does a brilliant job, with a fast moving economic news environment with situations like Ireland ... it's not her job to take positions or give anything other than objective personal opinions and generally this is a very difficult to achieve.

More importantly ... have you got any economic analysis of these moves by Ireland?

47. At 7:54pm on 24 Nov 2010, threnodio_II wrote:
=========================================================================
Surely the question should be first, is there a job for them or has it been created. Only last week the HR Director for the South's Ministry for Health said that he could deliver with less than 50% of his staff. So why then has he had so many staff for so long? And people are questioning why Ireland has issues, not that the UK is any different.

And to answer your point on payment.

If the post is not needed then paying person A to work £10 or giving him social support £5, the difference is £5 and the fact that hopefully he will go onto find a "real" job, IE not one that has been created out of thin air.

84. At 09:07am on 25 Nov 2010, busby2 wrote:
=========================================================================
Ireland may well have to join the cue as Germany reportedly have already looked into this.....

Now that would be a currency worth investing in, the Euro without Germany. I can see that being up there with the best.

We hear much about the Celtic Tiger economy, and what a good model the Irish Economy was.

This was built on two factors. Firstly enormous amounts of EU money, building an infrastructure and business development, in an unsustainable way. Secondly, relying on the first, a ludicrously low Corporation Tax, to unfairly attract foreign businesses to relocate to Eire.

Now they have a problem, We, UK tax payers, are again paying, whilst allowing Eire to continue to attract foreign business investment. It should have been made a precondition of support that they raise the tax rate. Yet again we see the workforce paying the price, with business continuing to be subsidised. Why does the sheer partiality of the solution not become the big issue?

87. At 09:33am on 25 Nov 2010, nautonier wrote:
'More importantly ... have you got any economic analysis of these moves by Ireland?'


I have, I don't think they've truly marked to market all the property and land security held by their banks against failed promises to pay.
Which in turn means that the current expectations of how much they'll need to bailout their banks, will ultimately likely go up.

And I don't think the banks in this country have done it either.
In fact I don't think anybody actually wants to do it, because of what it would reveal.

30. At 5:22pm on 24 Nov 2010, Barry wrote:
Ireland is now a net contributor to the EU
=========================================================================
Well not quite, in 2009 they receive more than £1.8 billion directly from CAP alone, which by the way was more than they contributed alone without their other receipts. From 1973 to 2008 Ireland received over £44 billion from CAP. This on top of their net receipts which totalled over £34 billion from 1973 to 2002 put Ireland on the top of the handout list beating, you guessed it Portugal, Greece and Spain to the title.
On top of these there have been other "loans" for infrastructure programmes and also grants along with joint projects. They have also enjoyed benefits comming out of money given for cross border peace programmes. So your point I am afraid is not supported by the figures given by the EU, Ministry of Finance Etc Etc Etc.

24. At 4:55pm on 24 Nov 2010, Richard Dingle wrote:

The real lesson from all this is...

1. Anything too big to fail must be nationalised without compensation

2 Anything not too big to fail must be allowed to do so

Bailout in 2008 removed the banks only 'natural predator' - the market.

We have not moved forward.
----------------------------------------------------------------------
Am not entirely at odds with this but the last sentence is a bit of a ... well, howler really. We live in times where we have moved right of centre but are dabbling with State ownership again. Some 'progressives' would argue that is not forward enough, while other 'progressives' would say "Keep the market pure." Herr Dinkel, you must turn the LedZep volume down, when using cans - you are frying your brain!

If you are going to go that route we should have nationalised the UK utilities in 2008. Either that or the boards should have had the reality of near monopoly privilege pointed out to them very firmly by Government - rocketing prices, salaries and bonuses, and constant dividend increases are not acceptable to their customer base or their so-called regulators. Reform or else!

The big danger of your solution is the inherent incompetency of our current version of democratic government. What happens when they have got their hands on an industry? Or a business? The lessons of the twentieth century, by and large, are that at best muddling bureacracy and inefficiency or downright fraud and incompetence will be applied, in some degree, sooner or later.

Then there is a chance that, whether incompetent or not, or to what degree, a democratically elected government may suddenly jump way to the left and use your solution to nationalise everything in sight and take total control. [Would traditional Labour voters have backed Blair in 1997 (or 1993/94) if they had known how far to the right he was going to take Labour?] There are certainly enough posters here who are pushing for 1917!

Can't see a way around that apart from ramping up the engagement of the electorate beyond election day. And I do not have time right now to muse further. It certainly 'sticks in the craw' today to hear of Network Rail's £299m profit that has been extracted from car drivers and rail passengers on the back of subsidy from the former and which will find its way into (larger) shareholder dividends and, probably, bonuses for Directors and senior management.

Thoughts anyone ... ?

Hey! Let's be careful out there today.

91. At 10:09am on 25 Nov 2010, Dempster wrote:

87. At 09:33am on 25 Nov 2010, nautonier wrote:
'More importantly ... have you got any economic analysis of these moves by Ireland?'
.....................
Hi Dempster

I have, I don't think they've truly marked to market all the property and land security held by their banks against failed promises to pay.

..............

You're quite right ...

Also, in my view the 'vested interests', very large 'preferred creditors' are being very lazily protected here by the banks ... particularly with e.g. UK commercial property and other assets (and not because the banks care a great deal about other people's jobs) while or own UK and other politicians and so called 'business leaders' (Ha Ha) preach and scream about avoiding protectionism ... when all that is protected in the UK is the vested interests who are not taking their risks and failures ... as leaving the ordinary British taxpayers and their living standards exposed.

British commercial property and other bank loans needs a massive shake up with lower rent levels for occupiers and the legal abolition of upward only rent review clauses in commercial leases.

Meanwhile, Britain's real economy is in general economic decline outside of that strange and different country called 'London'.

Similarly with Ireland

29. At 5:19pm on 24 Nov 2010, hughesz wrote:

"Ideally governments should be aiming for ZERO debt and public sector no bigger than 35% of GDP. Thus when problems occur additional borrowing can be arranged for a temp basis.

Impossible ? No , just requires politicians who don't think every increasing spending is the cure to societies problems."


75. At 00:58am on 25 Nov 2010, jonearle wrote in response:

Unfortunately it isn't that easy. If our government tried to wind back our debt, by running a permanent surplus, we would be in massive depression. Simply because money is debt. They are the same thing. You get rid of the debt and you get rid of money.

------------------------------

I have not studied economics but it seems to me that we might not be able to see the wood for the trees. The interest charged on one man's debt is interest added to another man's capital (well not quite, the lender takes his cut). So our economic system depends on debt to generate the money which finances the generation of "wealth".

But where do the banks get the money they lend? In the old days Building Societies granted mortgages from the money they got from savers, and the savers were compensated for their generosity with some of the interest charged on the mortgages being added to their capital. This meant that, at times, mortgages could be hard to come by if there weren't enough savers, but at least a Buiding Society could never go bust.

I'm not suggesting a return to the Gold Standard but we do have to think about where all the money that's borrowed comes from. Some of it comes from a bank's depositors, that's what fractional reserve banking is all about, but clearly not all of it. Some say the money is effectively summoned out of thin air merely by making the necessary entries in the bank's books, but that sounds too much like printing money which, as we all know, is a cardinal sin. So others say it's far more complicated than that, certainly far too complicated for us mere mortals to understand and, rather ironically as it turned out, a bit too complicated for the bankers who thought they could get away with lending money ad infinitum to people whom they should have suspected would be unlikely to pay it back.

I wonder what would happen if, instead of loans being shifted around electronically, each borrower went to their bank and withdrew their loans in cash? I'm guessing there wouldn't be enough cash to meet such demand, so wouldn't the government have to print some?

Nautonier (post 29) is right, we've got to start thinking outside of the box.

What is the point of the EU if there is a open border policy with regards to trade globally?

Discuss......

87. At 09:33am on 25 Nov 2010, nautonier wrote:

"Stephanie Flanders ... I think, does a brilliant job, with a fast moving economic news environment"

I`m sorry Nautonier,but in this instance you go too far.We`ve had zero mention of the ongoing foreclosuregate fiasco in America since it started.

Absolutely nothing.........not even an indirect mention..........like it`s not even happening............in the land of "the country in which the financial crisis first reared it`s unwelcome head"............masssive implications for the global and USEconomy..........

He,he,have a look at this:

https://www.theamericandreamfilm.com/view-trailer.php

97. At 10:44am on 25 Nov 2010, stopsupportingcriminals wrote:

87. At 09:33am on 25 Nov 2010, nautonier wrote:

"Stephanie Flanders ... I think, does a brilliant job, with a fast moving economic news environment"

I`m sorry Nautonier,but in this instance you go too far.We`ve had zero mention of the ongoing foreclosuregate fiasco in America since it started.

................

Thank goodness for that ... hasn't Britain got enough problems here; both with its exposure to closest EU member neighbour Ireland and its own 'EU straight-jacket' ... the US foreclosures are a big and distressing event but still a US 'domestic issue' as not requiring UK taxpayer/govt involvement ... I prefer a detailed commentary on Ireland, at the moment, as Britain has the potential for losing as much if not more than Ireland here.

"Ministers fear new rules could open the door to UK benefits for migrants from outside the EU who have never worked. The European Union wants migrants from Iceland, Norway and Lichtenstein to have the same rights to benefits as citizens of EU countries.

Previously, it was only workers, who had paid into their home country's national insurance schemes, who were entitled to welfare payments in other EU countries."

And they fiddle while we all burn.