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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

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The Irish 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 longer.

"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 2014.

- Building and construction will shrink by 0.4pc this year and increase 5.7pc next year.

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 sustainability.

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 2007.

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.

Entitled


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.

More sustainable

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 more sustainable.

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 deal.

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 billion”.

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 per cent.

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 avoided.

Spectre

“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.

Empathised

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 special.

“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 online.

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 media.

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 said.

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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