Brian's Blog

April and Austerity

2013-05-10T11:26:19Z

April has been a bad month for the proponents of austerity. Did we really have to wait till April 2013 for the Government and troika to wake up and realise that severe austerity ultimately curtails growth?

Early in the month, Ashoka Mody, the IMF's former mission chief to Ireland, stated that reliance on austerity for Ireland was counterproductive and that failure to tackle Irish bank bondholders was a mistake.
In midmonth, an academic paper by two eminent US economists Reinhar and Rogoff used to justify austerity measures was found to contain fundamental errors which undermined their proposition that high governmental borrowings (as in Ireland) are necessarily connected to minimal economic growth.
On the eve of last weekend's G20 meeting in Washington, EU commissioner Olli Rehn indicated that the euro zone will slow its budgetary belt-tightening because the troika's austerity programmes were having a greater-than-expected impact on growth.
On Monday the president of the European Commisssion conceded that austerity wasn't a sustainable policy in the absence of social and political support

Published in Irish Times Readers Comments on 4th May 2013.

Quick Banking Inquiry

2013-04-15T17:03:10Z

Will we ever see a report on the Irish banks like the UK's recent parliamentary report on HBOS? Its chapter headings read like a thriller - "The best board I ever sat on", "The price of failure", "Conclusion - a manual for bad banking".

I don't think the establishment has the stomach for a "full blooded" inquiry which would make the DIRT inquiry look like a picnic. As an alternative, our politicians could get a copy of the HBOS report and simply do a quick search/replace of names, places and dates as I suspect that the findings and conclusions could be left unchanged.

Letter published in the Irish Times on 15th April 2013.

Hypocrisy of Banks

2013-04-02T08:24:03Z

Reports that AIB is planning to sell a €200 million loan portfolio beg the question as to why taxpayer-owned and foreign-owned banks are selling huge blocks of loans at discounts as high as 70 per cent and crystallising losses amounting to billions while resisting any similar broad-based write-downs of seriously distressed home mortgages.

These discounts are additional to the €40 billion taxpayer-funded losses realised when developer loans transferred to Nama at a huge discount. Surely, to be consistent and fair, the covered banks should be required to offer write-downs to all very distressed mortgage holders especially given that they have already been fully funded by taxpayers to do so?

Letter published in the Sunday Business Post on 31st March 2013.

Pension Fund Theft?

2013-03-22T12:37:03Z

There is nothing extraordinary about the proposed Cypriot levy on apparently untouchable deposits. The Irish Government led the way by imposing a 0.6 percent annual levy on similarly untouchable private pension funds. It expects to gather €1.8 billion from this underhand action which provoked minimal opposition or protests unlike developments in Cyprus.

Of course, no similar penalty applied to public sector pensions amidst recent ministerial claims that constitutional property rights preclude the slashing of outrageous pensions being paid to former politicians, mandarins and bankers.

Lead letter published in the Irish Times on 21st March 2013. This follow up letter was published on 27th March 2013.

William J XXX (26th March) stated that I was factually incorrect when quoting me as saying (21st March) that "no penalty applied to public sector pensions". I actually wrote "no similar penalty" in the context of the Government's raid on private sector pension funds. This is factually correct.

He goes on to write about public sector pensions being dependent on employee contributions but ignores the fact that these pensions, particularly at higher levels, are largely financed by private sector taxpayers who could never aspire to secure such attractive pension benefits for themselves.

Exiting the Bailout?

2013-03-19T14:06:13Z

Notwithstanding years of austerity, Ireland still has some of the most over-borrowed public and private sectors in the developed world and, according to Christine Legarde (IMF managing director), has only completed two-thirds of the current bailout programme. Against this backdrop. there is no way that Ireland will be able to break free from the troika for years to come.

Over the next year or so, we might have to contend with Croke Park chaos, dissent over the property tax, another savage budget just as people are seeing how sneaky the last one was, slow economic growth, large street protests, further Dail defections, local election upsets, foreclosures/evictions, further bank restructuring, surging emigration and other unexpected nasties.

They will all feed into the next Dail elections which could well result in a trouncing of the governing parties and the formation of a very weak, rainbow government. In the absence of strong and decisive national leadership, the troika is likely to demand a continuing supervisory role notwithstanding that its motives and agenda would not be in our national interest.

Letter published in the Sunday Business Post on 17th March 2013.

Horses and Health

2013-02-18T17:45:58Z

If food labelling fails to disclose ingredients, how can the nutritional information be accurate?

Letter published in the Irish Times on 9th February 2013.

Promissory notes: Call a Referendum

2013-02-03T15:31:54Z

I sent the following email about the promissory notes to all TDs and Senators this afternoon:

Hello

I have reproduced below a letter from me published in today's Sunday Business Post advocating non-payment of the promissory notes.

In it, I emphasised that payment would create a cash loss of €30 billion for the State and that non-payment would create NO cash loss for the ECB/ICB. This is a key point which distinguishes the Irish situation from sovereign defaults which have had serious ramifications for the defaulting states.

If the PNs are not paid, do you really believe that the ECB would apply sanctions to the "best boy in the class"? I think not as these would also provoke a huge euro crisis.

A write off of the €30 billion. as distinct from any other deal, would be transformational for the Irish economy whose the debt/GDP ratio is almost120%, or 150% based on GNP when fickle profits of multinationals are excluded. Let us face facts, this level of debt is completely unsustainable and tinkering at the edges will be fruitless.

Personally, I would like to see politicians work together (for once) in order to provoke a referendum on the question of payment of the PNs so as to settle the matter for once and for all for the electorate, EU, ECB and other international interests. This could be achieved by asking the Dail and Seanad to consider a Bill relating to payment and then, in accordance with Article 27 of the Constitution, getting a majority of the Seanad and one-third of the Dail to petition the President for a referendum on the grounds that the Bill "contains a proposal of such national importance that the will of the people thereon ought to be ascertained".

Such an initiative would have the overwhelming support of the electorate, even without anticipating the result of the referendum. It would also evoke a positive response from the financial markets, and even the ECB might get around to understanding that the circumstances surrounding the PNs were absolutely unique and required a euro-wide response.

Brian

[ To see the SBP letter, just scroll down to next entry or click ]

Don't Pay the Promissory Notes

2013-02-03T11:59:48Z

Professor Morgan Kelly, writing about the Anglo bailout in 2008, suggested that "the money might as well be piled up in St Stephen's Green and incinerated". Well, unless a write-off deal on the promissory notes is struck, that is exactly what will start happening in March, albeit at a different location, when €3.1 billion of "real cash" is passed to the Central Bank where it will disappear in a puff of electronic smoke.

Any deal that replaces notes with bonds is unacceptable as it simply pushes this senseless burning of Irish taxpayers onto another generation. Instead, a full write off must be sought and secured on the grounds that the cost of the bailout of Anglo should not be foisted on blameless Iriish taxpayers,

A write off is entirely within the gift of EU central bankers and, while it might result in a temporary loss of face, no loss of cash would be incurred. In fact, the full €30 billion will be effectively written off irrespective as to whether notes are paid or not.

The Government should stop spinning and whining about unfairness. Instead, it should start playing hardball and show more backbone even at this late stage.

Burning €30,000,000,000 of taxpayers money for no return whatsoever makes no sense and is extortion given that the State is bankrupt.

What exactly would the ECB do if the notes are not paid? Pull the rug from under the Irish economy or just make the "best boy in the class" sit on the bold step for a while?

Lead letter in the Sunday Business Post on 3rd February 2013.

OMG, WTF, LOL

2012-12-22T10:28:34Z

OMG, what has become of the paper of record?

On Tuesday last Fintan O'Toole and Frank McDonald (Opinion and World News, December 11th) both used the term WTF in their articles. Do you plan to explain what WTF means to uninitiated readers? LOL.

Letter published in the Irish Times on 17th December 2012.

Budget for 2013

2012-12-11T14:00:41Z

Tables compiled by the Dept of Finance showing the impact of the budget on various incomes say it all. Here is an extract for a married couple with a house, without children and paying full PRSI:

On a gross income of €45,000, the reduction in income will be €422 a year (1.2% of gross).
On a gross income of €175,000, the reduction in income will be €872 a year (0.9% of gross)

So, for someone earning four times more, the impact of the budget is only doubled. Inequity is even greater for people further down the income scale. How can this budget be viewed as fair?

Letter published in the Irish Times on 7th December 2012.

Why Pay Taxes and Debts?

2012-06-18T09:37:41Z

Would some kind reader explain why I shouldn't follow the example of the so called 'good and great' and avoid paying my debts and taxes by hiding my wealth, falsifying documentation or emigrating to a tax or bankruptcy haven?

Letter published in the Sunday Business Post on 17th June 2012.

YES voters will kick themselves for voting YES

2012-06-05T13:04:35Z

I wrote the following unpublished letter to the Irish Times on 27th May (two days before the referendum).

To assist decision-making in an uncertain situation, such as a referendum, there is a technique called mini-max which entails selecting the option that minimises the maximum post-event regret, i.e. to minimise the force with which you'll kick yourself for having made in retrospect the wrong decision.

If 'yes' voters win, I believe that many of them will kick themselves as they will realise they have locked themselves into a bad deal from which they cannot escape as further austerity bites and stability proves elusive.

They will regret their 'yes' votes and realise that 'no' would have kept options open, created space during a time of great uncertainty, and bolstered Ireland's negotiating position on bank debt write offs, growth and austerity strategies, and future funding.

But, by then it will be too late as whatever chance they might have had of a second referendum if 'no' wins, they'll regret having no such opportunity if 'yes' wins.

Dept of Finance and Nama

2012-05-12T09:48:29Z

The Department of Finance's recent strategy statement indicates that it aims to increase employment, ensure sound finances, raise living standards, address the international debt and restructure the banks. In reality, it will do nothing of the sort as the document also indicates that the Department's role is simply to provide "independent, impartial and well informed advice" (and about time too). This mixing of altruistic goals and practical actions permeates the document.

For example, on Nama it states that the Department will "insist on the highest standards of transparency in the operation of NAMA, on reduction in the costs associated with the operation of NAMA, and that decision-making in NAMA does not delay the restoration of the Irish property market". Sounds impressive but why didn't it simply state that it will extend Freedom of Information to Nama, cut outrageous fees paid by Nama and stop it trying to rig the market.

Letter published in the Irish Times on 12th May 2012.

Constitution and Fiscal Compact

2012-05-10T13:21:44Z

The constitutional amendment for the Lisbon Treaty made numerous references to our membership of the EU. It also referred to the EU's authority to pass laws alongside other competent bodies under the Lisbon and related treaties.

The proposed amendment for the Fiscal Compact makes no mention of EU or prior treaties and indicates that unspecified "bodies competent" can pass laws or measures for Ireland. This begs questions as to whether the Fiscal Compact should be viewed as an EU or international treaty and whether these bodies competent might be same ones that are driving the EU into a depression by insisting that austerity is the only way forward.

It is extraordinary that Ireland eventually agreed to the Lisbon Treaty in a second referendum partly because we were promised a permanent Irish Commissioner. Yet today, the entire Commission seems to have been pushed aside by banking and political forces and we are being urged in the current referendum to deliver key aspects of our Constitution and lawmaking not to the EU but into the hands of an international treaty led by so called bodies competent where our influence is likely to be minimal by comparison with the Commission.

Letter published in the Irish Times on 10th May 2012.

Message to TDs about European Stability Mechanism

2012-05-05T09:59:31Z

I sent the following message about the ESM to all TDs on 4th May 2012:

In case you missed it, I had a letter about possible outcomes to the referendum published in the Irish Times on 2nd May [see a copy in entry immediately below].

I call on all TDs, irrespective of their party, to respect the wishes of the electorate in the event of a NO vote in the referendum by refusing to ratify the closely related ESM treaty.

To do otherwise would be a flagrant breech of democratic principles and an insult to voters.

If the referendum is rejected and Ireland has difficulty securing a second bailout, it will be forced to batten down all hatches to preserve cash and reduce outflows. Once in this type of of sovereign examinership, it would be legitimate to suspend all unnecessary payments to creditors including those related to the promissory notes and to defer bond repayments even if these actions might trigger a default. As this would have major adverse consequences for the euro, the EU/ECB/IMF would be forced to provide a second bailout, even if the ESM is closed off to Ireland, to prevent contagion, if for no other reason. This bailout will have to include a stimulation package as well as massive relief on debt linked to the bank bailouts as without these the EU/ECB/IMF might as well pour their support down the drain.

If, on the other hand, Ireland ratifies the ESM, it will have to make a contribution of €11 billion. As this money will have to be borrowed, the ESM will effectively return the €11 billion as part of a second bailout. This will push Ireland's debt/GNP ratio to well in excess of 150 per cent - a level which is absolutely unsustainable and unmanageable in the absence of massive debt write offs and stimulation measures.

Thanks for reading this. Hopefully it will generate the response being requested.