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News : Irish Last Updated: Dec 3, 2012 - 8:30 AM

Monday Newspaper Review - Irish Business News and International Stories - - December 03, 2012
By Finfacts Team
Dec 3, 2012 - 8:26 AM

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The Irish Independent reports that the most bitter rift in the Government to date has led to a super property tax for homes worth over €1m.

And the Government is now considering whether to use the extra cash from millionaires' mansions to reduce the property tax for owners of ordinary homes.

The change -- if decided on -- would cut the property tax bill for the average house by €30 from €300 to €270.

After a bitter row between Fine Gael and Labour Party ministers over how to hit the wealthy in the Budget -- described as their worst spat since entering Government -- the so-called mansion tax emerged as the compromise deal from the cliffhanger.

Relations in the Coalition are tense, with Labour ministers angry at Fine Gael's late demand to cut social welfare rates in return for hiking tax for those earning more than €100,000.

Following a stalemate, both sides backed down knowing the consequences of failing to reach agreement.

"It certainly is the closest it has come to a breaking point in the 20 months in Government. There was no certainty of a deal," a coalition source said.

The elderly will take a hit in the Budget.

Thousands of pensioners will have to pay for their prescription drugs due to a cutback on the over-70s' medical cards.

The income thresholds to qualify for an over-70s' medical card will be reduced from €36,000 for a single person and €72,000 for a couple to €30,000 and €60,000.

Those who lose medical cards will get 'GP only' cards.

The telephone allowance for pensioners is also being halved.

But the pension won't be cut and Transport Minister Leo Varakdar confirmed last night the free-travel scheme is not being touched in the Budget.

A range of measures to hit high earners will be brought in:

* A higher property tax rate on houses worth more than €1m.

* A cap on private pension tax relief at €60,000;.

* Higher Capital Gains Tax.

* Higher Capital Acquisitions Tax.

Following a cabinet stalemate, where the proposals to hike the USC and cut social welfare were dropped, the Coalition agreed to a higher rate of property tax for houses worth over €1m.

The details are still being worked out, but the extra revenue from the mansion tax may result in some relief at the lower end.

The number of houses worth over €1m has still to be worked out. However, the Property Price Register shows 20 houses in Dublin sold for more than €1m in the past two months alone.

Last night, the rates being speculated on in government circles were a base rate of 0.18pc – down from 0.2pc – with a new higher rate of 0.25pc on houses valued at more than a €1m.

The option to bring in a super property tax, where the rate of tax would rise with the value of the property, was first revealed by the Irish Independent in July.

Under the proposals, the normal rate of tax will apply on properties valued up to €1m and the higher rate will apply on those valued above €1m.

But the Budget negotiations left a "bitter taste in the mouth" for the Coalition. Ending the stalemate, Labour ministers backed down on their demand for a higher USC rate when they met just before the cabinet meeting on Saturday evening.

Fine Gael ministers then backed off on the social welfare cuts.

"There is a lot of anger on our side," a senior Labour source said. "We feel Fine Gael are out of touch and decided to throw welfare cuts into the pot in the last couple of days, knowing there was no way the Labour Party was going to support it.

"It revealed a priority of our coalition partners about who they want to protect and who they want to target," a senior Labour source said.

"There is a high level of frustration and anger at the tactics that were employed. The logic is hard to fathom and it was unnecessarily creating tensions at the head of Government."

The possible USC charge and social welfare cuts never reached the cabinet table.

Instead, the row was played out in a series of meetings involving Taoiseach Enda Kenny, Tanaiste Eamon Gilmore, Finance Minister Michael Noonan, Public Spending Minister Brendan Howlin and their advisers.

Fine Gael figures were unapologetic for their actions as they viewed a hike in the USC as a break in the promise not to raise income tax.

"The Programme for Government is being honoured by all sides, including the Fine Gael manifesto proposal to cap pensions relief at €60,000," a senior party source said.

But Labour Party TDs were furious about Fine Gael's approach.

"They don't care about the ordinary punter. This was our big thing, we wanted this last year, too. It wouldn't bring in much but it would be about solidarity. We're furious," a Dublin TD said.

"They wouldn't give it and wanted a baseline cut in all social welfare payments for the USC. They have enough people to pass a Budget without us."

Mr Gilmore said the closing stages of the Budget "discussions are always intense and run late into the night".

He added that what was saved in the Budget would not go to the IBRC.

The Irish Independent also reports that the number of gamers using the rescued Full Tilt Poker website plunged 40pc after it relaunched last month, the Irish Independent has learned.

The website, which employs more than 200 people in Dublin through its holding company Rational FT Services, came back online on November 6 after a year in which it was blighted by legal troubles.

Full Tilt Poker was effectively shut down by US authorities but a rescue deal saw the business bought by Poker Stars, its biggest online poker rival, earlier this year.

As part of the deal, Poker Stars, through Rational FT Services, took on the assets of Full Tilt Poker, and Pocket Kings – a Dublin-based business, which provided customer service and support to Full Tilt Poker users.

On its opening day, around 23,000 people visited the site at any one time, while as many as 15,000 people gambled. Now, traffic has dropped to a little over 8,000 at any one time.

Despite the fall, a spokesman said Full Tilt was pleased with the site's performance.

"Full Tilt Poker is back and is the number two online poker site in the world," he said.

The Irish Times reports that some 200 jobs are to be created by Dublin-headquartered company Centric Health, with the construction of 10 new primary healthcare centres and the expansion of the company’s diagnostics business.

The expansion follows a €20 million investment by European private equity group Metric Capital Partners.

Centric Health, which employs 350 people, already operates 10 primary care and GP centres across the State. It is also a joint venture partner in VHI Swiftcare.

Centric separately operates a medical recruitment business, which specialises in GP recruitment in Ireland, Britain and Australia.

In addition Centric is a 75 per cent shareholder in Global Diagnostics, a medical diagnostics business with operations also in Ireland, Britain and Australia. Under the new deal, Centric is acquiring the remainder of the firm.

About 50 of the 200 new jobs are expected to come on stream within the next year, and will include positions for medical, paramedical and administrative staff. The first centre is due to open in Newbridge in February, with plans under way for centres in Celbridge and the Navan Road in Dublin. The primary care centres will be run alongside the Health Service Executive.

It is envisaged that Centric will operate about 20 per cent of each facility with the remainder leased to the HSE.

Centric chief executive Maurice Cox said the injection of new capital would allow the company to double its primary care centre operations, in line with the Government’s commitment to developing primary care facilities.

“We are delighted to be playing our part in the delivery of a world-class primary care system in Ireland, which is a central plank of the Government’s health policy, while at the same time focus on our growing diagnostics business,” he said.


Metric Capital Partners, based in London, is a private equity group which invests in European small- and medium-sized firms. Transactions this year included investments in LM Funerals, Dutch firm Vincent Hotel Group and Kedleston, a special educational needs company. NCB Corporate Finance advised on the deal.

As part of the transaction Centric is to acquire the remaining 25 per cent of Global Diagnostics, which provides remote radiology services to health bodies. David Sheehan, chief executive of Global Diagnostics, said the investment would help it to expand in its three international markets.

The Irish Times also reports that Knock Airport in Mayo is considering taking a legal challenge in Europe over the Government’s decision to separate Shannon Airport from the Dublin Airport Authority.

Knock’s chief executive Liam Scollan has told The Irish Times he believes the decision to separate Shannon from the DAA on a debt-free basis, while also making other incentives available in the region, amounts to illegal State aid and will result in a “gross distortion” of the market.

Minister for Transport Leo Varadkar and Minister for Jobs, Enterprise and Innovation Richard Bruton will today announce the separation of Shannon by the end of the year and its merger with Shannon Development’s landbank next year.

Ambitious plans have been drafted to establish an international aviation services centre beside the airport and to increase air traffic by one million passengers a year.

Debt relief 

The DAA will assume Shannon’s €110 million debt. It is understood the Department of Finance is also considering a number of incentives to encourage businesses to locate aviation activities in Shannon.

Mr Scollan said the State support for Shannon, which is expected to lose about €7 million this year, will threaten the viability of Knock, which is owned by a community trust.

“We consider what the Government is proposing to be unfair, a wasteful use of public resources and possibly illegal,” Mr Scollan said. “Our legal advice is telling us that the decision by the Government should be challenged.

“We will have to look very seriously at taking this either to the European courts, to the competition directorate in Brussels or to the Irish competition authorities.”

Mr Scollan said Knock’s passenger traffic would grow by about 5 per cent this year, to 682,000. Shannon’s traffic has declined to 1.5 million a year from 3.6 million in 2007.

While Knock is privately owned, it has been grant-aided by the exchequer. This is due to cease after 2014. Between 1997 and 2012, Knock received €16 million in capital grants from the State. This year it will receive an operational grant of €589,000, which will help to defray a projected loss of €660,000.

It is understood the task force that advised the Government got legal advice which said the plans for Shannon did not breach EU state aid rules.

The Irish Examiner reports that banks based in this country still have a considerable amount of assets to dispose of although any sale in the current market environment would mean heavy losses as prices remain at distressed levels.

The pillar banks — Bank of Ireland, AIB, and Permanent TSB — had to offload a total of €34bn to meet deleveraging targets agreed with the troika.

Bank of Ireland has sold €10bn worth of assets at a haircut of roughly 8%. AIB has divested €17bn of assets, well within the losses assumed by the Central Bank’s prudential capital assessment review conducted in Mar 2011.

Danske Bank has €4.7bn in non-core assets. IBRC has a loan book of €25bn which it has to run down over the next eight years. Ulster Bank has €6.2bn in a non-core loanbook it has to run down.

According to a senior executive with one of the pillar banks, who did not want to be named, there had been tensions between the Department of Finance and the covered banks during 2011 over the pace of deleveraging, with the department putting pressure on the banks to meet their targets as quickly as possible.

This raised concerns among the banks that a firesale of assets would create a capital hit that would require a future recapitalisation.

The Department of Finance denies this version of events and points out that all targets have been reached without incurring losses that exceeded the review limits.

Bank of Ireland and AIB both benefited from more favourable markets for their international assets, which kept losses to a minimum. Bank of Ireland still has to offload its UK-based Bristol & West €29bn mortgage book.

But the remaining assets held by the banks are mostly in the Irish property sector. Last month, it was announced that UK bank Lloyds had sold a €1.8bn loanbook belonging to Bank of Scotland Ireland for €149m, which is less than 10 cents in the euro.

Market sources say that is not an accurate reflection of the market. Bank of Scotland Ireland had come late to property lending which meant it had poor-quality assets. Moreover, Lloyds had made aggressive provisions against losses in its Irish operations as it was looking for a quick exit from this country.

US distressed debt specialists Apollo Global Management took over the Lloyds book. However, there are signs the market could be normalising.

The giant hedge fund Blackstone bought the landmark Burlington Hotel for €67m, which is less than one-quarter of what property developer Bernard McNamara paid for it in 2007.

Blackstone is said to be on the lookout for more Irish assets. It is believed another US private equity firm, Colony Capital, is also looking at the Irish market.

But sources say there is insufficient liquidity in the system to get property prices moving again. As long as banks are deleveraging they will be looking to increase their deposit bases and shrink their loanbooks, which means they won’t be lending over the near- to medium-term.

An overall recovery hinges on wider developments, particularly a recovery across the eurozone and visibility on whether the Government can secure a restructuring to the €64bn in bank debt.

Foreign news reviews and more comprehensive coverage of Irish news is available in our Daily News Digest in the Global category on Finfacts Premium.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

© Copyright 2011 by Finfacts.com

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