December 2010 Archives

Vote Against IMF/EU/ECB Bailout

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Here is the text of a message sent to all TDs ahead of the Dail debate on the IMF/EU/ECB rescue package on 15th December. This debate lasted two hours and the package was approved by 81 votes to 75.

I would ask you to reject the IMF/EU bale out in the vote on Wednesday on the following grounds:

- Our debt crisis cannot be solved by increasing our national debt.

- Our deep recession cannot be reversed by reducing economic activity.

Please note that the €85 billion rescue package includes €17.5 billion of our own money and up to €35 billion could end up being used to "rescue" major continental banks and the ECB.

It appears to me (and many experts) that Ireland will default sooner or later as the bale out terms are too onerous and growth projections are unrealistic. So, lets nip the problem in the bud as delay will only make matters much worse.

If the bale out is rejected by the Dail, the worst that can happen is that the terms will have to be renegotiated to slash the composite interest rate and restructure senior bank debt. To facilitate the latter, a clear distinction must be made between sovereign and bank debt.

Finally, this is one of the most important votes ever taken in the Dail and I would urge you to vote in the national interest rather than on party lines.

Click the Continue Reading link below to see replies received (as at 21st December):

IMF/ECB/EU Bailout

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If any new EU treaties are planned for the next decade, it is increasingly likely they will be blocked by Irish referenda and there will be no reruns to reverse decisions.

Our debt crisis cannot be solved by increasing debt, and a deep recession cannot be reversed by reducing economic activity.

And can we stop talking about a €85 billion rescue package as €17.5 billion is our own money and up to €35 billion could end up being used to "rescue" major continental banks and the ECB.

Letter published in the Sunday Business Post on 12th December 2010.

Revenue Distorts 2011 Tax Analysis

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On 7th December 2010, the Department of Finance published Annexes to the Summary of 2011 Budget Measures in the context of the Budget presented by the Minister for Finance.

This Budget sought to reduce the Exchequer deficit by €6 billion by increasing taxes and cutting public expenditure. The former included reduced tax credits, replacement of health and income levies by a Universal Social Charge (USC) and the extension of PRSI.

The fourth page of Annex C dealing with the USC contained a chart   revenue_chart_2011.pdf and claims that "the overall taxation system remains highly progressive after the introduction of the USC". This chart has been distorted and misleading to justify this claim - look at the income range which is truncated and increases in irregular steps from 10,000 to 200,000. Is it any wonder that a highly progressive tax system is claimed!

Here is our version of this chart 2011_tax_comparison.pdf  which uses a regular scale for incomes up to €1 million in 10k steps. It shows that the tax system is highly progressive for people on low and middle incomes but flat lines for those with very high incomes. This directly contradicts the Government's claims. It also shows that the 2011 Budget changes will have the greatest impact on people with the lowest incomes.

A picture is only worth a thousand words when it doesn't distort the truth. It looks as though by publishing their chart, the Minister for Finance, Department of Finance and Revenue are engaged in deception regarding the progressiveness of the Irish tax system. Either that or they need to go back to school to learn how to draw graphs.

Other recent blog entries relating to the progressiveness of the Irish tax system include:

Default Expected

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According to the Government, the combined annual average interest rate (for the proposed bale package supported by the IMF/EU/ECB) will be of the order of 5.8% per annum. If we exclude the State's contribution of €17.5 billion which is interest-free then the average interest rate on the borrowed €67.5 billion rises to 7.3%.

If correct***, this rate assumes an even chance of Ireland defaulting on the loans. When is the point of the bale out if there is such a high risk of failure?

Letter published in the Irish Times on 30th November 2010.

*** This was subsequently found to be incorrect, the 5.8% rate applies only to the €67.5 billion. However, this rate includes a risk premium of about 3%.

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This page is an archive of entries from December 2010 listed from newest to oldest.

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