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News : Irish Last Updated: Jan 17, 2013 - 9:07 AM


Thursday Newspaper Review - Irish Business News and International Stories - - January 17, 2013
By Finfacts Team
Jan 17, 2013 - 7:03 AM

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The Irish Independent reports that the downturn is putting huge pressure on household budgets, with a new survey showing that more than 1.6 million people have €50 or less to live on every month after paying essential bills.

And the majority of people believe their financial situation will worsen this year, blaming the latest Budget for putting a new squeeze on incomes.

Property tax and the budgetary change to pay related social insurance (PRSI) have been named as pressure points on family spending, a new survey commissioned by the Irish League of Credit Unions indicates.

Two-fifths of adults have had to sacrifice spending on other household items such as food and entertainment to pay energy bills.

Working adults have emerged as among those most financially put-upon, according to the survey that was conducted by iReach among 1,000 adults in December.

There has been a big rise in the number of workers who say they have €50 or less to live on after paying essential bills.

Close to 700,000 people with jobs had just €50 or less a month to survive on in December after covering their main bills. This is up 69,000 from October last year. When homemakers and the unemployed are included, the number risees to 1.6 million. Last month's savage Budget had a negative impact on nine out of 10 people.

One of the rare pieces of good news is that there has been a slight fall in the number of households struggling to pay bills on time.

But 46pc of households still find bill paying a huge issue, down from 50pc last October.

The survey also found that seven out of 10 adults are unable to save.

This is far higher than the findings of a Nationwide (UK) Ireland survey that found half were unable to save.

Yesterday the Irish League of Credit Unions said the average amount being saved every month was down €20 to €180.

Car-related costs have gone up for householders, with petrol and diesel at record highs and insurance increasing for young women.

Two-fifths believe that the property tax will have the most significant impact on them.

Other areas that are also likely to have a marked impact this year include changes in the PRSI threshold, increased car registration costs and the cut to child benefit.

Large numbers report that at some point in 2012 they had to sacrifice spending on other household items to pay their energy bills.

Chief executive of the Irish League of Credit Unions Kieron Brennan said: "Disposable income overall continues to decrease with 72pc stating that they have less disposable income in December than they did in December 2011."

He said many are simply continuing to struggle to survive on a daily basis.

Many individuals and families are sacrificing spending on other household items including food so that they can keep on top of their bills, he added.

The Irish Independent also reports that a new scheme to put long-term unemployed to work as council workers is being planned by the Government.

Up to 3,000 people on the dole for more than two years will be put to work at street cleaning, cutting grass and carrying out road works.

The Cabinet will hold a meeting today where a wide range of initiatives to create jobs will be discussed.

Environment Minister Phil Hogan and Social Protection Minister Joan Burton are working on the council work scheme.

Up to 2,000 of the jobs will come on line by mid-year with another 1,000 by the end of the year. The posts won't replace existing jobs or displace staff but is aimed at giving local authorities additional resources.

Although the exact details have yet to be worked out, the scheme is expected to work in a similar manner to the Jobs Bridge scheme. It is not yet clear how many hours a week workers will work for or if they will be paid extra on top of their dole.

Ministers will discuss measures that are expected to be included in the new version of the Action Plan for Jobs for 2013. Every minister will have to outline to Taoiseach Enda Kenny what they have in the pipeline to create jobs and what they need done in their sector to encourage job creation.

Jobs Minister Richard Bruton is due to publish the next version of the jobs plans next year. The Action Plan for Jobs is the Government's plan to create 100,000 jobs through a series of policy changes.

The Irish Times reports that all Ministers have been required to supply a memo to the Taoiseach in advance of today’s special Cabinet meeting on jobs, detailing how they propose to tackle the crisis.

The proposals for job creation and job activation measures supplied by 14 departments will form the basis for today’s discussions. Taoiseach Enda Kenny has said repeatedly since the Coalition took office almost two years ago that job creation is his top priority.

“The Taoiseach’s resolve on this should not be underestimated,” a Government source said. “Back in the autumn, he asked every Minister to come up with ideas for savings and that has led to the talks on a new Croke Park deal. He is equally determined to get results on the jobs front.”

Individual Ministers 

The Cabinet meeting is designed to ensure that individual Ministers are committed to actions in their own departments that will ultimately result in reducing unemployment.

“The Government can’t create jobs itself but it can create the conditions in which employment can expand and every department has a role to play in that,” the Government source added.

A detailed Action Plan for Jobs was published last year by Minister for Jobs and Enterprise Richard Bruton, but the aim now is to get every other member of the Government involved in taking the decisions necessary to boost job creation.

While there will be some discussion about the role of inward investment in maintaining the strong export sector in order to boost employment, there will be a focus on how the domestic economy can be stimulated.

Measures to enhance competitiveness and facilitate access to credit are regarded as critical and Ministers will discuss how their departments can facilitate that process.

The operation of three funds worth €850 million, which were announced by the National Pension Reserve Fund last week, will form part of the discussions.

Those funds are designed to provide small and medium enterprises with access to equity, credit and investment.

The role of Nama and the banking system in helping to promote investment in enterprise will also be discussed today.

The State’s capital investment programme will also feature in the discussions, as will the involvement of local government in investing in necessary infrastructure.

Important strand 

As well as job creation, the role of the welfare system in promoting job-activation measures will form another important strand in the discussions.

The Department of Social Protection has produced a comprehensive report, Pathways to Work, designed to get people off welfare and into employment, but there is some frustration at the slow pace of change in the welfare system.

Ministers will look at ways of accelerating change to enable people move more freely between the welfare system and the jobs market.

During the discussions they will also focus on the importance of retraining to ensure the workforce can adapt to the rapid changes in the labour market.

The Irish Times also reports that the banks will be required to raise more capital if they do not begin dealing with distressed mortgages, the governor of the Central Bank has said.

Addressing an Oireachtas committee yesterday, Prof Patrick Honohan said there were approximately 100,000 cases of loans in distress and the Central Bank had been putting pressure on the banks to put in place “a machine” to process them.

He said that once the machine was in place, the Central Bank “can and will” then require the banks to deal with prescribed numbers of cases.

If the banks failed to do this, the Central Bank would require them to raise more capital, as not dealing with the loans would affect the risk position of the banks.

Force banks 

Prof Honohan made his remarks to the Joint Committee on Finance, Public Expenditure and Reform, where a number of TDs complained that the Central Bank was not doing enough to force the banks to deal with people who had loans they could not service.

Prof Honohan told e committee chairman Ciarán Lynch (Labour) that the issue was a key one for the Central Bank.

His comments came as the ratings agency Standard Poor reiterated its negative view on Ireland and said the banks may need more capital.

Richard Boyd Barrett (Independent) said the policies supported by Prof Honohan shared the common thread that it was “Joe Public who carried the can” and the financial institutions that were protected.

Prof Honohan said this was not the case and there would be “dire consequences”, not least for Joe Public, if Ireland followed Mr Boyd Barrett’s suggestion that bondholders owned billions by the banks were not repaid.

“Considerable goodwill” 

Prof Honohan said he did not want to speculate as to whether Ireland’s bid for a deal on the €3.1 billion Irish Bank Resolution promissory note payment, would be achieved before to March 31st next, when the payment is due.

He said there was “considerable goodwill from all interlocutors in this process” but that it had not been easy to find a generally acceptable solution.

“Taking into account both the statutory position and wider policy stance of the ECB, an initiative of this type will be novel and, as such, challenging.”

The bank had been working carefully to build understanding and confidence around a set of proposed transactions designed to deliver for Ireland, while not taking other decision-makers too far out of their comfort zone, he said.

“What we have designed is, I believe, largely in the interests of the euro system as a whole,” Prof Honohan added.

Done and dusted 

When Pearse Doherty of Sinn Féin said it was clear from those comments that the solution was “done and dusted”, the governor said he was “over interpreting” his comments.

He said the deal, if achieved, would be “something of great advantage to Ireland”.

The solution being sought would allow a slower and better path for the debt going forward, he said.

Any transaction that allowed a lengthening of maturity could increase the level of interest to be paid, but if the interest rate was low enough that issue could be addressed

Joe Higgins (Socialist Party) said Ireland had 1 per cent of the EU’s population but was, according to Eurostat, shouldering 42 per cent of Europe’s banking bailout costs.

The Irish Examiner reports that in a detailed analysis of the airline market, Davy forecast that Ryanair’s stock price could increase from €5.35 to over €6 in the coming year.

Analyst Stephen Furlong said he can see the airline growing. “With a favourable capacity environment, positive revenue momentum, and the potential for a renewed growth story, we are increasing our Ryanair price target to €6 (from €5.35),” he said.

In the near term, Davy does not believe Ryanair will record considerable growth in passengers this year as the airline was not expected to take delivery of any new aircraft, but due to Ryanair’s business model, revenues could still be expected to grow.

“With no further aircraft deliveries implying just 4% capacity growth this summer and some building blocks of unit revenue already put in place in terms of priority seating and credit card fees, coupled with Ryanair’s legendary cost discipline, we are raising our price target to €6 and maintaining our ‘outperform’ rating,” he said.

Looking at the long-term future of Ryanair, Mr Furlong said the airline, which carried nearly 80m passengers last year, could grow its number by 50%.

“Ryanair has circa 12% of the European short-haul market and sees the potential to grow profitably to 120m passengers per annum over the next 10 years. We see the story returning to one of growth, which could lead to multiple expansion,” he said.

Davy expects an update on a deal with Boeing to provide the airline with the capacity to fuel expansion. The airline will also benefit from the sale of Stansted.

Davy was not as bullish on the Aer Lingus share price. The analysis forecasts a full year operating profit of €73.9m (€72.8m in H2) on revenue of €1.37m.

The airline suffered last year as a result of weaker business demand in core routes to London during the Olympics as well as fuel price and airport cost inflation. However, Aer Lingus remains healthy.

“Forward bookings were ahead of last year; since then, traffic statistics have been strong, notably on long haul. At the end of the quarter, the airline had gross cash of €990.8m (after the €16m dividend payment) and debt of €549.7m. The Greenfield cost programme has delivered more than €100m in cost savings,” Mr Furlong said.

Overall, Davy said that the larger airlines — IAG, Lufthansa, and Air France-KLM — were finally recognising the challenges that they were facing from the low cost airlines such as easyJet and Ryanair.

“We are more positive on the network airlines as they are finally getting serious about the need for fundamental restructuring,” he said.

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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