The Irish Independent reports that the country's two top banks are vying for first-mover advantage in a multi-billion euro effort to raise fresh capital from financial markets.
Sources said it is unlikely that Bank of Ireland and Allied Irish Banks will choreograph their rights issues over the coming months -- raising the prospect of both competing in the market for investment at the same time.
Finance Minister Brian Lenihan upped the ante this week when he said the loss-making banks must resolve their capital issues in the first quarter.
But banking sources said it will be "challenging" for both to have necessary clarity on a number of issues, including NAMA discounts, by the end of the first quarter in order to pitch a share sale to the market.
Mr Lenihan estimated last September that Ireland's lenders face an average 30pc discount on €77bn of loans bound for the "bad bank".
However, recent cautious comments from the banks and anecdotal evidence suggest that the average will be deeper.
"We were surprised by the certainty the minister appears to be attaching to the first quarter," said one senior banking source, "but we will be pulling out all the stops."
Trading update
Bank of Ireland is slated to give the market a trading update in mid-February, while Allied Irish Banks is due to unveil its full-year figures on March 3. A source familiar with capital planning at the other institution said Mr Lenihan's comments has "focused minds" and that "you can expect discussions with the minister's people to commence in earnest again very soon".
Government sources believe, however, that another key market concern for investors -- Brussels' decision on their respective restructuring plans -- could largely be hammered out by late February, which is earlier than many observes expect.
The European Commission's say on AIB's and Bank of Ireland's viability plans will be key to any investment case.
Analysts largely believe Brussels will demand AIB sell its 23.5pc stake in US lender M&T and 70.2pc-owned Bank Zachodni. The sale of both stakes could generate up to €2.5bn of capital, but a resultant dramatic retrenchment of AIB's geographical profile back to Ireland may put some international investors off. Banks would also have to provide the market with a degree of confidence on the level of losses coming down the tracks on their mortgage and business books, which, analysts currently believe, will be as deep as their NAMA discounts.
The Irish Independent also reports that the head of the Revenue Commissioners, Josephine Feehily, has warned senior colleagues leaving the organisation they are not allowed to share their professional knowledge with the private sector upon retirement or when they take a career break.
Ms Feehily told members of the Revenue's senior management at a meeting in Trim, Co Meath, recently that those departing, even for short-term work arrangements, must obey rules governing outside employment in the private sector.
Decimated
Large sections of the Revenue Commissioners have been decimated by staff departures in the second half of 2009, including the large cases division, which deals with the wealthiest taxpayers. The organisation said the main reason for defections and retirements was the organisation's older age profile.
Senior tax practices in Dublin are believed to be interested in hiring some of the tax inspectors, often on multiples of their current salaries.
The recent imposition of the pension levy and other public sector pay cuts has, in some cases, created a gap between what senior tax inspectors can earn in the private sector compared to the public sector.
Ms Feehily reminded her senior colleagues at the meeting in October that they needed to be aware of the potential for conflicts of interest when members of the Revenue Commissioners accept jobs outside the civil service.
According to standards in public office rules, the main area of difficulty arises when a tax inspector joins a company he or she previously had official dealings with. Very senior tax inspectors are not allowed accept a private sector position within 12 months of leaving the Revenue Commissioners.
But according to the rules set out by the Standards in Public Office Commission, this only applies if the nature of the appointment "could lead to a conflict of interest''. Even after a year has elapsed senior tax inspectors must continue to observe the Official Secrets Act.
Tax inspectors below assistant secretary level must apply to the head of the organisation for permission to take up a private sector role.
Officers at and above assistant secretary level must apply to the Outside Appointments Board, the state body that covers the entire public sector.
Applications from tax inspectors are considered by the authorities "on the basis of determining whether or not a clear conflict of interest exists''.
Approval to take up a private sector role may either be unconditional or have conditions attached.
The Irish Times reports that two-thirds of Irish people say they are enjoying their lives as much as ever, despite the recession, according to new research carried out for the National Consumer Agency (NCA).
Although more than half of consumers have seen their income drop over the past year, most say they were spending the same or even more than before, the research shows.
They are shopping around for value less and plumping more for convenience since the last survey was carried out last year. Price, cited by 65 per cent of shoppers, is still the main factor influencing purchasing decisions but the number of consumers shopping around has dropped from 75 per cent to 67 per cent, the NCA’s latest round of market research shows.
Convenience was cited by 17 per cent as a determining factor, up from 13 per cent in the last survey.
The report by Amárach Consulting says two-thirds of consumers are actively seeking cheaper ways of living, 69 per cent are trying to buy fewer things and a similar number are putting off big purchases until the economic situation improves.
Just over half of respondents say their income has decreased, yet almost three in five report their household expenditure going up or remaining the same. Despite this, Irish consumers remain upbeat, with 67 per cent confirming they are enjoying their life as much as ever and 69 per cent viewing the recession as a good opportunity to pick up bargains in the sales.
NCA chief executive Ann Fitzgerald describes the trend away from shopping around as very worrying. “If that trend continues and we fall back into old habits, becoming complacent in our shopping behaviour, we can expect retailers to take advantage resulting in less competition and higher prices.”
A majority of shoppers say they have changed their habits, with the biggest changes being to cut back on treats for the family, take advantage of special offers and buy less.
While more than 50 per cent of consumers admit to seeking out special offers, most respondents say they would prefer to see long-term lower prices rather than special offers.
The report reveals the various ways consumers are coping with the recession. Four out of every five people budget for household expenses, more than half are seeking ways to socialise that are less expensive and more than half are holding off on holidays until things improve.
A third more consumers than previously are collecting and using coupons and 35 per cent more than before are cooking at home from scratch.
More consumers than ever are buying own-label goods and more than a third of consumers say they are shopping more in discount stores such as Lidl and Aldi.
The Irish Times also reports that Ireland's dominant development model was deeply flawed because of its focus on economic growth as the key to progress while avoiding crucial questions of values and ethics, according to Social Justice Ireland (SJI).
In a collection of essays, Beyond Gross Domestic Product: What Is Progress and How Should it be Measured?, SJI directors Fr Seán Healy and Sr Brigid Reynolds argue that failure to address important questions meant the excesses of the Celtic Tiger years were encouraged and potential social gains dissipated.
“Ireland’s people are left with a serious debt problem, a major fiscal problem, a bank system into which they are pouring billions to rescue people who took totally unjustified risks and/or acted illegally while accumulating great wealth for themselves.
“Ireland’s social services are under serious pressure, there are serious questions about getting value for money and the public sector is in need of reform.
“Ireland’s international reputation leaves a great deal to be desired following its failure to act in a prudent manner with a focus on the common good. Most of this could have been avoided if Ireland’s development model was focused on the common good, on building a better future for the people of the country, rather than focusing, principally, on generating economic growth.”
The book is based on papers delivered at a conference in Dublin last November 17th. In the introductory chapter, Prof PJ Drudy of Trinity College Dublin writes that traditional indicators such as gross national product and gross domestic product were problematic when used as the main measure or indicator of progress.
GDP “cannot reflect the complexities involved in development because it reveals little or nothing about a range of social, cultural, environmental as well as strictly economic factors that can enhance or debilitate the quality of life.
“Higher levels of production, consumption, or investment do not necessarily indicate higher levels of development and well-being across the population.”
Prof Drudy argues that “we must turn instead to this more appropriate goal of human development by using a much more comprehensive set of variables which place emphasis on sustainability, freedoms, capabilities and empowerment within a human rights based framework.
“Indeed, we need to turn away for good from the obsession with economic growth and the philosophy of the market to focus instead on a philosophy and a set of values and ethics which facilitates and nurtures human development. To achieve this, new more appropriate national and international structures must also be put in place.”
Social Justice Ireland is the successor of Cori Justice. The book was published with assistance from AIB Investment Managers.
The Irish Examiner reports that Ireland's external debt levels fell by €51 billion during the third quarter of last year, according to latest figures from the CSO.
External debt basically forms the part of a country’s overall debt that is owed to creditors based outside of the country and can include monies owed to a variety of sources, including commercial banks, companies, other governments and international financial institutions such as the IMF and the World Bank.
The latest CSO figures published yesterday show that our foreign debt levels, as of the end of September, stood at a fraction under €1.64 trillion – down from €1.69trn at the end of last June and the second quarter of 2009.
Our external debt figure has – barring a minimal increase during the first three months of last year – steadily declined since the end of 2008. Although monies owed to overseas governments rose from €72.1bn to €73.4bn in the third quarter of last year (and have steadily increased from €57.7bn from the end of 2008); the biggest area of debt remains to what the CSO lists as ‘monetary financial institutions’ or commercial banks. Debt in this category has declined from €767.7bn as of the end of 2008 to just shy of €690.8bn as of the end of last September.
Monetary authority’ liabilities – such as to the IMF – decreased by €48bn in the quarter under review to €56bn. "This was due to decreases in Ireland’s end quarter liabilities to the European System of Central Banks," said the CSO.
"It should be noted that much of this external debt is offset by holdings of foreign financial assets by Irish residents," it added.
The Financial Times reports that Germany’s liberal Free Democrats, junior partner in the centre-right ruling coalition, pledged on Wednesday to forge ahead with the generous tax cut plans it campaigned on last year.
The pledge comes amid increasingly intense wrangling in the ruling alliance over the direction of fiscal policy in the coming years.
Guido Westerwelle, foreign minister and FDP chairman, used the party’s annual new year congress in Stuttgart to reassert his authority and counter criticism from within and outside the party that he had grown too elusive on economic policy as he focused on his new portfolio.
He also fended off attacks from within the coalition that, after over a decade in opposition, the FDP had yet to grow into its role as a government party
“Those who are productive should no longer be punished for it,” Mr Westerwelle said, stressing his party’s liberal principles.“This is why we decided to support families and small and mid-sized earners.”
Speaking before the traditional event, Rainer Brüderle, economics minister, said: “Without growth, budget consolidation will not work. . . So we must be more ambitious and bring the people more relief.”
The FDP was the main driving force behind plans by the government of Angela Merkel, chancellor, to kick off her second term with a €8.5bn ($12.3bn, £7.6bn) package of tax cuts, enacted late last year, and to continue with another round of cuts this year worth just under €20bn.
Yet Ms Merkel’s Christian Democratic Union has grown increasingly reluctant to implement the plan because of the burgeoning federal budget deficit.
In private, senior CDU officials describe the agreement with the FDP on tax cuts as a necessary evil to get the new government up and running that must now be circumvented.
The federal government faces a budget deficit of €85.8bn this year, according to the draft budget, more than twice the previous record reached in 1996.
Mr Westerwelle’s determination to push through his tax proposals has also faced criticism from members of the party’s parliamentary group sympathetic to the CDU’s message of fiscal austerity, and from party grandees in regional governments, who fear for their own public coffers.
Meanwhile, the portfolios the FDP managed to secure in the government – economics, foreign affairs, international development, health and justice – have left it without an obvious platform from which to push its tax agenda.
Its main public finance experts, including Hermann Otto Solms and Otto Fricke, having failed to secure executive jobs, are confined to parliament where their voices are not being heard.
Mr Westerwelle sought to ease tensions on Wednesday, saying Ms Merkel and her finance minister, Wolfgang Schäuble, a CDU veteran close to the chancellor, were sticking to “every comma of the coalition agreement”.
The FT also reports that Gordon Brown on Wednesday faced down an attempted Labour leadership coup, but his authority and hopes of a political revival took a battering on a dramatic day in Westminster as senior cabinet ministers offered only lukewarm support.
The prime minister was relieved that the latest attempt to topple him attracted only a trickle of support, after two ex-cabinet ministers called for a secret ballot of Labour MPs to settle “once and for all” whether he should lead the party into the next election. The attempted putsch by Geoff Hoon, a former defence secretary, and Patricia Hewitt, former trade secretary, was hastily planned and ill-timed, coming just as Mr Brown has been showing signs of a political recovery.
Nick Brown, Labour’s chief whip, claimed the rebellion had been a flop. He reflected the anger of many MPs when he said: “It’s pretty shameful what Geoff Hoon has done.”
While the prime minister believes the rebellion has been crushed before it even started, the belated and at times grudging expressions of support from some of his most senior cabinet ministers were ominous. Lord Mandelson, business secretary, and Alistair Darling, chancellor, were among those who initially offered only lukewarm words of support for the prime minister, while David Miliband, foreign secretary, took almost six hours to give his qualified backing.
Mr Brown’s aides insisted the low-key response from ministers was a sign that the government was not rattled and that a “relaxed” prime minister wanted his colleagues to continue with “business as usual”.
But the hours of silence from potential Labour leadership contenders including Harriet Harman, deputy leader, and Mr Miliband were taken as a sign that they were waiting to see if the rebellion would build momentum.
The initial reticence of Lord Mandelson and Mr Darling was seen by some as a signal that Mr Brown should not take their support for granted. Both Lord Mandelson and Mr Darling are disgruntled with Mr Brown’s attempt to suggest that Labour can carry on spending on public services rather than stressing the need for tough action to tackle the budget deficit.
Lord Mandelson, who helped to keep Mr Brown in his job after the abortive leadership coup last June, offered a comment through his spokesman: “No one should overreact to this initiative,” he said. “It is not led by members of the government. No one has resigned from the government. The prime minister continues to have the support of his colleagues and we should carry on government business as usual.”
Mr Darling, a close friend of Mr Hoon, was said by aides to have been ignorant of the plot. But the chancellor’s statement simply recorded the fact that the government should focus on the economy and did not offer explicit backing to Mr Brown.
Unless one or more of Mr Brown’s ministers resign in the coming days, the latest attempted coup is likely to be the last chance for Labour to abandon its leader. Polling day is expected on May 6.
Many Labour MPs were furious at the move’s timing. The party has been showing signs of recovery in the polls and Mr Brown has appeared more confident at the despatch box.
David Cameron, Conservative leader, faltered on Monday when he launched his election campaign.
The New York Times reports that it seemed like the offer of a lifetime — earn $2,500 by flying to France aboard a private luxury jet.
But as the fine print made clear, there would be no Eiffel Tower or chateaux, no foie gras or Bordeaux. Travelers were confined to a laboratory in either Toulouse or Rouffach with electrodes attached to their heads, testing whether a drug could keep their jet-lagged bodies awake.
That drug, Nuvigil from Cephalon, could become the first medicine specifically approved by the Food and Drug Administration to combat jet lag.
A jet-lag antidote might seem to be the latest lifestyle drug, a further step in the “medicalization” of something that is not an illness. But sleep specialists, who call the affliction “jet lag disorder,” say that while not exactly a disease, it is a condition that can be dangerous — as when someone tries to drive a car right after arriving in a distant time zone.
For Cephalon, a company in Frazer, Pa., whose business tactics have attracted federal attention, the approval for jet lag is part of a plan to extend patent protection for its core franchise in stay-awake drugs.
Nuvigil is a slight modification of Provigil, an older stimulant that will face generic competition in 2012. Provigil sales were about $1 billion in 2008, accounting for half of Cephalon’s revenue. Nuvigil, which first went on sale in June and has a longer patent life, had sales of $38 million through September.
The F.D.A., to the surprise of even Cephalon, agreed to review the Nuvigil application in six months, instead of the usual 10. Such a priority review is usually granted to drugs for serious diseases, though the agency says it can also give rapid reviews to the first drug for a less serious ailment.
But in late December, the agency delayed its decision until March 29, to allow more time to analyze the data, according to Cephalon. The agency does not comment on drugs under review.
Jet lag results when the body’s internal clock is out of sync with daily life, making people sleepy when they want to be awake and wakeful when they want to sleep. It is one of several so-called circadian rhythm disorders that are attracting increasing attention from the pharmaceutical industry. Some studies suggest that disruption of the daily rhythms can contribute to obesity, mental illness and other ailments.
Nuvigil and its predecessor, Provigil, are already approved to treat the excessive sleepiness associated with narcolepsy, sleep apnea and “shift work sleep disorder” — which can affect people who work the graveyard shift. But the drugs are prescribed widely to treat the sleepiness associated with other diseases, or even just to help healthy people get by on less sleep.
For jet lag, Nuvigil would be approved to treat only the sleepiness associated with jet lag disorder — not to shift the body’s clock to the new time zone.
“It’s something that can help you overcome the symptoms, but not the cause of the problem,” said Charmane I. Eastman, director of the biological rhythms research laboratory at Rush University Medical Center in Chicago, who was not involved in Cephalon’s trial.
Cephalon plans to aim Nuvigil at business travelers who might go to Europe for a couple of days, not those staying longer term. For a short trip, “you don’t want to shift your circadian clock very much,” said Dr. Lesley Russell, Cephalon’s chief medical officer.
The company’s executives are not predicting how much an approval for jet lag would add to Nuvigil sales. The drug would be taken for only a day or two to treat jet lag, whereas other uses involve taking it for long periods.
A market challenge for Cephalon will be that Nuvigil costs at least $9 a pill, with one pill usually taken each day. Nuvigil will have to compete with inexpensive jet-lag treatments like coffee, sleeping pills and the nutritional supplement melatonin.
Nuvigil has not been clinically compared with those remedies, some of which might work as well but have never been specifically approved for jet lag. Sleeping pills, for example, are approved to treat insomnia, whatever the cause, so there has been no need to seek a specific approval for jet lag, said Thomas Roth, director of the sleep disorders and research center at Henry Ford Hospital in Detroit and a consultant to Cephalon.
And stimulants like caffeine and amphetamines, he said, are generic, so manufacturers have no incentive to conduct clinical trials.
But even if Nuvigil sales for jet lag are small, F.D.A. approval would help Cephalon advance its franchise-extending strategy.
But Provigil will face generic competition in April 2012 under terms of an agreement Cephalon made with several generic drug manufacturers. The Federal Trade Commission has sued Cephalon, saying it paid off those generic manufacturers to delay the advent of competition.
Cephalon, which denies the charges, is trying to shift patients from Provigil, also known as modafinil, to the very similar but slightly longer-acting Nuvigil, or armodafinil. Nuvigil has patent protection until 2024, although generic drug companies are already moving to challenge those patents.
To get patients to shift, Cephalon has raised the wholesale price of Provigil to $13.60, from about $5.50 a pill five years ago, including a 29 percent increase in November. So Provigil is now 50 percent more expensive than Nuvigil.
And Cephalon is also trying to have Nuvigil approved for new uses beyond those of Provigil.
Not only would jet lag be the first of these new uses, but its formal approval for that condition would enable Cephalon to promote Nuvigil to a broad array of doctors, not just those who treat sleep disorders.
“What a jet lag indication allows you to do is go to virtually every doctor, because every physician will at some point treat a patient who will have jet lag,” said Corey Davis, an analyst at Jefferies & Company.
Cephalon needs to be careful about which doctors it visits. The company pleaded guilty in 2008 to a misdemeanor and paid $443 million to settle federal and state charges that it had promoted Provigil and two other drugs for unapproved uses.
For jet lag, Cephalon is seeking approval only for eastbound travel. Westbound travelers tend to adjust better, experts say.
The clinical trial involved 427 healthy adults who were flown from the East Coast, departing in the early evening and arriving in France around 7 a.m. local time.
The volunteers were allowed to sleep on the flight but were not allowed to tilt their seats back more than would be possible in economy class on a commercial flight. They were not allowed to drink coffee or alcohol or to take sleeping pills.
Each was given either Nuvigil or a placebo pill after arrival and on the next two mornings. At 10 a.m., noon, 2 p.m. and 4 p.m. each of those days, participants went to bed in a dark, quiet room. As soon as they fell asleep, as measured by brain waves, they were prodded awake.
Those who got the placebo took an average of only 3.4 minutes to nod off on the first day, 6.2 minutes on the second day and 8.2 minutes on the third.
“These folks are as sleepy as people with narcolepsy,” said Dr. Richard K. Bogan, an investigator in the trial and chairman of SleepMed, a sleep disorder diagnosis center in Columbia, S.C.
But those who got the highest dose of Nuvigil stayed awake for an average of 9.7 minutes the first day, 13.8 minutes the second day and 14.8 minutes the third.
Experts say that level of wakefulness is close to or within the normal range, though it is still less than the 15 minutes on average that it took the participants to fall asleep on a similar test before they left for France.
Those who got Nuvigil did have somewhat more trouble sleeping at night in France than those who got the placebo, and also were more likely to suffer headaches, nausea, palpitations and anxiety. Since many people who might take a pill for jet lag are otherwise healthy, the F.D.A. might be stricter about safety than it would be for drugs used to treat diseases.
Seth B. Miller, who took part in the trial, said that even though participants still did not know whether they got the drug or placebo, he thought he received the high dose of Nuvigil, “I was jittery,” he said.
Still, Mr. Miller, an information technology consultant in Manhattan who blogs about his frequent flying at wanderingaramean.com, said he would be interested in using Nuvigil.
Mr. Miller said that since the participants were not allowed out of the laboratory, they did not really feel as if they were in France. Even the cuisine gave no clue.
“The food was miserable,” he said.
The NYT also reports that despite extensive government intervention in the housing market, some policy makers at the Federal Reserve are worried that even more might need to be done.
The minutes of the Federal Open Market Committee’s mid-December meeting, released on Wednesday, reflected a lingering wariness about the strength of the recovery in light of high unemployment and substantial slack in the economy.
At the same time, unease is growing that a tentative comeback in the housing market could fall apart as a tax credit for home buyers expires and the Fed’s program to hold down mortgage rates comes to a close.
Concern over housing deepened Wednesday with the release of new data showing that long-term interest rates were rising rapidly from their historic lows, while mortgage applications to purchase houses were falling. Applications are now at their lowest level in 12 years.
Other signs of stress in real estate have become apparent in the last few weeks, although most economists say any downturn will be relatively mild.
If they are wrong, and the modest pace of economic growth slows or mortgage markets significantly deteriorate, “a few members” of the Federal Open Market Committee believe that “more policy stimulus” may be desirable, the Fed minutes said.
But one member of the panel took an opposite view, saying that the “quantity of planned asset purchases could be scaled back” because of continuing improvements in the economy.
Noting the contrast between “a few” and “one,” Michael Gregory, senior economist at BMO Capital Markets, projected a shift in policy.
“There emerged a definite skew towards more accommodation,” Mr. Gregory wrote in a research note.
The Fed has been buying $1.25 trillion of mortgage-backed assets to ease lending markets and keep longer-term rates low — a program that is winding down and scheduled to end by March 31.
The program was successful for much of last year, pushing mortgage rates below 5 percent, to levels not seen since the early 1950s. Many economists say the end of the program will push rates back up from a half point to a full point, adding to the cost of a house and diminishing the pool of buyers.
Emergency measures to stabilize short-term lending and other markets are also being scaled back and ended as the economy pulls itself out of a deep recession. The tax credit for home buyers, extended once by Congress, is scheduled to end on April 30.
The president of the Federal Reserve Bank of St. Louis, James Bullard, said in late November that the Fed should continue purchasing the securities.
“I have advocated to keep the asset-purchase program open but at a very low level, and wait and see what happens,” Mr. Bullard told Dow Jones Newswires. Mr. Bullard becomes a member of the Federal Open Market Committee this year. That committee is the Fed’s main policymaking body.
His view was quickly endorsed by the nation’s real estate agents, a potent lobbying force who were successful in getting the first-time buyer’s tax credit extended and broadened.
“The March deadline is artificial and should not hold firm,”said Lawrence Yun, chief economist for the National Association of Realtors. “Maybe we’ll need this stimulus until May or autumn.”
The Mortgage Bankers Association said rates rose in the last two weeks of December, to 5.18 percent from 4.92 percent. Meanwhile, applications for purchase mortgages fell.
Mortgage applications offer an imperfect glimpse into the state of the housing market. If many houses are being bought by speculators with cash — as is the case now — that activity is not reflected in the figures.
The numbers also tend to bounce around from week to week.
Nevertheless, the trend is sharply down. Applications are more than 25 percent below their level at the end of 2008, the banking group said.
The Fed left its interest rate target unchanged at levels near zero at its meeting, and the minutes indicated that most members believed inflation was not an imminent threat to the economy.
“They’re very anxious not to torpedo the stabilization we’ve seen in the housing market, but they don’t want inflation expectations to get out of hand,”said John Canally, an economist at LPL Financial.
“They’re walking a pretty narrow tightrope this year,”he said.
