|Wolfgang Schäuble and Pierre Moscovici, ministers of finance of Germany and France respectively, discussed the challenges of the European economy and the Irish bailout with European Parliament MEPs, Monday, Dec 03, 2012.
Irish Budget 2013: Monday witnessed another installment of the Irish-EU bank
debt version of Salome's 'Dance of the Seven Veils.' Recent stirrings of
optimism that at least part of the €64bn* in State support for banks after the
economic crash would be mutualised, were dashed again when France joined Germany in the European Parliament, in
rejecting an extension of last week's terms of the latest Greek bailout, to
Ireland and Portugal. The enduring addiction to spin at Irish policy level comes
at a cost. Pleading the 'béal bocht' while being happy to promote to
international audiences, a misleading
narrative of recovery, underpinned by rising exports and competitivness, has consequences.
The bailout Troika with two permanent representatives in Dublin, is not
fooled of course but the desire to have a 'poster boy' of success means that
official reports do not tell the full story.
"Greece is a very unique case...neither Ireland nor Portugal have put this idea to me," was
the answer from
Wolfgang Schäuble, German finance minister, when asked at a meeting of the
European Parliament's economic affairs committee in Brussels
Monday if the Greek terms would be extended to Ireland and Portugal. “For
Ireland and Portugal, which are in the process of returning to the markets
step-by-step, it would be a disastrous sign, and that’s why I would really
advise them not to further follow this point,” he added.
Pierre Moscovici, French finance minister, testifying jointly with
Schäuble, said Ireland and Portugal are “clearly not in the same situation” as
Greece is the country where the crisis started.
bank debt: A €64bn gift from Europe for cargo cultists looks unlikely
(breakdown of bank-related debt here)
Bloomberg reports that Michael Noonan, Irish finance minister, signaled
that easier terms may be too much to ask for, saying Greece was saddled with
“onerous” conditions to obtain them. Still, he said, Ireland will see “if
there’s something in the Greek deal that offers us another element.”
Noonan called two points -- the reduction in EFSF (the previous rescue fund)
lending rates and a 15-year extension of maturities -- “an interesting idea.”
Portugal is pursuing similar concessions, based on a July 2011 pledge by
European leaders to treat aid recipients equally.
At the conclusion of the monthly Eurogroup meeting
of Eurozone finance ministers on Monday night in Brussels, Jean-Claude
Juncker, chairman and Luxembourg prime minister, threw a further spanner in
the works, at a press briefing.
"I don't think the Eurogroup is prepared to give equally similar treatment
to [Ireland and Portugal] when it comes to the detailed discussions taken as far
as Greece is concerned," he said.
Schäuble and Moscovici may well believe that Ireland has exited from
of perdition. Debt will peak at about 120% of GDP (gross domestic product) --
similar to Italy's current level.
US economists Carmen Reinhart
and Kenneth Rogoff say that the good news from their historical study of eight
centuries of international financial crises is that up to the current one, they have all
ended. In their celebrated book,
Is Different: Eight Centuries of Financial Folly, they said from over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate arrangements, and
historic circumstances, one of their main finding was that the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90% of GDP. Above 90%, median growth rates fall by one percent, and average growth falls considerably
more. "We find that the threshold for public debt is similar in
advanced and emerging economies."
While GDP is the national accounts metric in the European Union,
it is not a
good measure for Ireland as it includes the inflated profits of the dominant
While GDP grew by 1.4% in 2011, GNP (which mainly excludes multinational
sector profits) fell by 2.5% and domestic demand dipped 3.7%.
Nominal GDP was 20% higher than GNP in 2011, up from a gap of
14% in 2009. Not only are exports significantly exaggerated, international comparisons of Irish labour productivity growth
and unit labour costs are distorted by the multinational sector.
Ireland: GDP or GNP? Which is the better measure of economic performance?
At the end of 2011 General Government Debt stood at €169bn or 108% of GDP and 131% of GNP.
Shouldn't Dr Schäuble know that the real debt
ratio will peak over 140% and that is based on current rosy growth projections?
Google in 2011 booked 44% of its global revenues
in Ireland in 2011 but it is in the realm of fairytales to brag that it is
Ireland's biggest exporter.
These are a number of other reports that seek
to present a Reality Check:
Irish Economy: Pharmaceutical patent cliff no growth
threat; High exports have low impact
Irish Economy: Export growth insufficient to pull
domestic economy out of recession
Irish Economy 2012: At least a third of value of
Irish services exports is overstated
Dell remains Ireland's biggest manufacturing exporter despite closing Limerick
Irish Economy 2012: Only 50,000 Irish direct
workers responsible for 69% of annual Irish exports
The addiction to spin is seen in four enterprise
ministers supported by vested interests, seeing salvation in an aspiration to
become a 'world class knowledge economy' and on Monday, Richard Bruton claimed
that two firms guaranteed 850 jobs, only if the Government cedes independence
to the loss-making Shannon Airport. The jobs may materialise but to claim this will be the crucial factor in the decisions, is risible
What is independence? Believe it or not thousands
of more jobs within five years through a minister appointing a local board from
a departmental list of 'safe hands' - - nobody that would rock the boat! A
new Shannon quango will report to Dublin.
Ask yourself, how do they get away with this
nonsense as memories fade of waffle on 'seismic shifts' and other illusory
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