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Thursday Newspaper Review - Irish Business News and International Stories - - May 16, 2013
By Finfacts Team
May 16, 2013 - 10:52 AM
Independent reports that the Economic Social and Research Institute has
predicted growth in the economy of 1.8pc for this year.
The ESRI has urged the Government to stick with austerity as the think tank
warned Irish growth was dependent on the revival of the international economy.
Yesterday's warning came as new data showed that growth in the eurozone shrank
more than expected in the first three months of the year with France slipping
into recession and Germany eking out minimal growth.
The Economic and Social Research Institute said gross domestic product would
expand 1.8pc this year and improve by 2.7pc in 2014, reflecting expected
stronger growth in exports of goods and services and a boost in domestic demand.
But the economic think tank said the forecast was predicated on the European
economy returning to growth next year, with a less positive outlook predicted if
that doesn't happen.
The growth projections are more ambitious than the Department of Finance's,
which expects the economy to grow by 1.3pc this year and 2.4pc next year.
The ESRI said the Government must stick with its budgetary process, even though
it expects that the Government's targets will be beaten. David Duffy, ESRI
research officer, said easing off could push the adjustment period out for
"Even at the end of the programme there's still a deficit there, so you still
have to borrow," Dr Duffy said.
"Taking those factors into account, we are of the view that you stick with the
process. Get the deficit down as soon as possible so you're not taking money out
of the economy for a longer period."
His comments echoed those of both the Fiscal Advisory Council and the Central
Bank, which have both urged the Government to stick with austerity.
Key forecasts from the ESRI's spring economic commentary include:
- Investment will grow 1.6pc this year and 5.5pc next year.
- Exports will grow 3pc this year and 5.3pc next year.
- Imports will grow 2.3pc and 4.3pc next year.
- Unemployment will be 14.2pc in 2013 and slip to 13.9pc in 2014, largely as a
result of emigration.
- General government balance will be 7.2pc of GDP in 2013 and fall to 4.6pc in
- Building and construction will shrink by 0.4pc this year and increase 5.7pc
The ESRI also said that emigration this year would hit 32,000 and drop to 22,000
next year. This is down from 34,400 in 2012.
The body said the deal on the Anglo Irish promissory note represented a
"significant alleviation" of short-term funding and should enhance debt
Meanwhile, a separate paper on the effect of so-called redomiciled PLCs on GNP
shows that large retained earnings of the companies raise GNP – the base on
which Irish contributions to the EU Budget are calculated.
Author John FitzGerald said that while the companies confer no significant
benefit on the Irish economy in terms of employment or taxes, they give rise to
a higher EU budgetary contribution.
The benefits of the retained profits of the redomiciled PLCs are attributed to
their foreign owners, and have no benefit to the Irish economy, the paper found.
The Irish Independent also
reports that the chairman of the Dail public spending watchdog has had to
embarrassingly reveal his son claimed the most overtime out of any hand-picked
ministerial aide in the last six years.
Andrew McGuinness worked as a personal
secretary for John McGuinness, the current Public Accounts Committee (PAC)
chairman, when his father was a junior minister.
The Irish Independent this week revealed that Andrew McGuinness was paid €30,000
in overtime in one year alone, on top of a salary of €42,000.
He was paid a total of €48,000 in overtime alone during his two years in the
Department of Enterprise, as well as other expenses such as €13,334 in mileage.
He did not have an office in the department, and is understood to have focused
on constituency work.
John McGuinness himself claimed these figures would "correspond with those that
have been paid to people who work for TDs, people who work for ministers".
He tabled Dail questions to each government department querying the overtime
given to every person personally hired by ministers or junior ministers since
Each question asked about "the individual amount of overtime paid in the case of
each political/ministerial appointee".
"I have asked the parliamentary question in relation to what has been paid to
other ministers . . . and a question in relation to what has been paid in
overtime to those who serve ministers," Mr McGuinness said earlier this week.
However, the responses to the second question showed that Andrew McGuinness was
far and away the highest overtime claimant.
Another of Mr McGuinness's staff at that time, personal assistant Ann Bergin,
was paid €29,754 in two years, with €20,679 in 2008. In total, his staff was
paid €87,816 in overtime in the period.
Some ministerial staff – such as those working for Eamon O Cuiv when he was
Minister for Social Protection – were paid no overtime whatsoever.
The figures cover all senior and junior ministers during the previous Fianna
Fail-Green coalition and the Fine Gael-Labour Government.
On average, each minister had around two staff working for them who were
eligible for overtime payments.
Other high individual claims included former junior foreign affairs minister
Peter Power's personal assistant, who was paid €18,834 in overtime in 2009.
Former Finance Minister Brian Lenihan had two staff entitled to overtime during
his three-year tenure between May 2008 and March 2011, and in that period they
each got €35,020 and €40,773.
Micheal Martin's personal assistant received €10,230 in overtime when he was
Minister for Enterprise, Trade and Employment between January 2007 and May 2008.
And Environment Minister Phil Hogan's personal assistant received €9,189 in
overtime over a two-year period.
Earlier this week, Mr McGuinness also said he had no quibbles with the overtime
figures for his son.
"There was a reason for the overtime and it's not something I did for him. He,
as an employee of the department, had to satisfy all of the regulations," he
told KCLR radio.
The Irish Times reports that the
Economic and Social Research Institute says the promissory note deal will cut
the Government’s deficit by more than €1 billion in 2014.
However, the costs of the associated liquidation
of the Irish Bank Resolution Corporation (IBRC) mean that it will increase
spending this year.
Despite the growth in spending, the ESRI is also predicting that the Government
will meet and probably exceed its target of keeping the deficit – the shortfall
between revenue and spending – within 7.2 per cent of gross domestic product.
In February the Government swapped the promissory notes used to pay for the €30
billion recapitalisation of the Anglo Irish Bank and Irish Nationwide for
long-term bonds, extending the repayment period and cutting the annual cost of
servicing the debt.
In its first Quarterly Economic Commentary
since the deal was announced, the ESRI says it is one of several factors that
should help to improve the outlook for the State’s public finances as it will
ease its short-term funding requirements and help make the overall national debt
It adds that the cost of winding up IBRC, the entity that took over Anglo and
Nationwide, and the interest that has already accrued on the promissory notes,
will be “slightly more” than the €1.1 billion savings that will result from the
However, it says the impact is expected to be more substantial in 2014 and in
subsequent years, “reducing the general Government deficit by approximately €1
The ESRI’s figures show that it expects Government spending to be €69.6 billion
this year, up from €68.8 billion in 2012.
With revenues estimated to be €57.5 billion, the State will end up with a €12.1
billion deficit, or 7.2 per cent of GDP.
It forecasts that spending will fall to €67.8 billion in 2014, aided by the
benefits of the promissory note deal, while revenues will grow to €59.8 billion,
leaving a shortfall of €8 billion, or 4.6 per cent of GDP.
The institute says the forecast deficit for this year will actually beat the
Government’s target of 7.5 per cent.
Similarly, it should also do slightly better than its 2014 target, which is 5.1
The bailout deal between the State and the EU-IMF troika obliges the Government
to meet those deficit targets.
While the State’s financial position is improving, the ESRI’s commentary,
published today, recommends that it continue with its austerity policies.
“Planned consolidation measures should be introduced as much uncertainty remains
for domestic and international growth,” the report, written by David Duffy and
Kevin Timoney, warns.
The Irish Times also reports that Ireland may have
over-corrected how it regulates banks and financial services firms and should be
“very careful” with further regulations to avoid losing business overseas, one
of five commissioners at the US Securities and Exchange Commission, the
country’s markets regulator, has warned.
Daniel Gallagher, one of two Republican commissioners at the SEC, said
regulatory change has been “pretty intense” over the last three years in
response to the financial crisis and that this should be reviewed before further
regulations are introduced.
“At some point it’s got to stop and people need to evaluate what is the impact
globally and domestically; I think Ireland has hit that point,” he said.
Speaking in Washington ahead of his arrival in Ireland today to speak at a
European corporate governance conference, Mr Gallagher said the crisis meant it
was “appropriate” to overhaul regulation but that over-regulation had to be
“I do think you need to keep tabs on
whether it is too much because you could really face the spectre of losing big
chunks of an industry that is very important to Ireland,” he said.
He echoed comments by former Taoiseach John Bruton, now ambassador for the IFSC,
and AIB deputy chairman Michael Somers who last week warned about the
consequences of regulation going too far.
Mr Gallagher said that he empathised with the
departing financial regulator Matthew Elderfield who said last week that
arguments for less regulation should be given “short shrift” if they were a
“vaguely articulated concern” about burden.
“He was brought in at a tough time. There was a lot of public outrage and he had
to show toughness. I do think he understands the competitive issues,” said the
SEC commissioner of Mr Elderfield.
“At the same time my guess is that he doesn’t want folks to forget the depths
from which they came a few years ago and journey back there.”
Mr Gallagher warned that if the UK opted out of new pan-European regulations of
financial services it could “stifle” what made certain countries like Ireland
“It would certainly be disruptive if Ireland was subjected to EU-wide
restrictions and London wasn’t,” he said.
The Irish Examiner reports that the vast majority of
companies are wasting time and effort when they make the foray into social media
as they have no plan in place, according to Niall Devitt from the Ahain Group.
Taking part in a panel debate, at the it@Cork European Tech Summit, on the
disruptive nature of social media, Mr Devitt said that most Irish companies are
seeing no return on their investment of time into promoting their business
Mr Devitt said: “The majority of business both in Ireland and internationally
right now are not getting ROI (return on investment) and that is the reality.
While social media and online are very fashionable, companies are either not
getting ROI or in a lot of cases are not measuring to know whether they are
getting ROI or not.”
He said that their has to be a more bottom-line approach to the use of social
He said companies that are not using business indicators to chart the return
that they were getting from social media are pointlessly incurring a cost.
“Goals for your digital strategy need to be [based on] traditional business KPIs
(key performance indicators). If your goal is to grow your Facebook fanbase to
20,000 fans, you are not actually implementing a social media strategy. You
could end up with 20,000 fans that don’t convert into customers and that is a
cost to your business,” he said.
Mr Devitt said that the majority of companies were jumping in to the
online sphere just to see what would happen and they get very little return he
CEO of Newsweaver Andrew O’Shaughnessy said that to successfully roll out a
social media strategy requires a lot of resources in order to see any return
“It is a process rather than a project the thought of OK we’ll concentrate on
social media in Q4 that doesn’t work it is a real commitment to the long term
this is a new world this is how it is happening now and we have to get with this
and that requires a lot of resources,” he said.
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