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News : Irish Last Updated: May 2, 2013 - 11:58 AM

Thursday Newspaper Review - Irish Business News and International Stories - - May 02, 2013
By Finfacts Team
May 2, 2013 - 8:34 AM

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The Irish Independent reports that health insurance premiums will rise by at least €360 per family in the latest crippling blow to household budgets.

This is because the Government has revealed that legislation will be enacted in July to charge all those with health insurance for using public hospitals.

Experts say customers will now be hit with a knock-on hike in premiums of at least 15pc – on top of multiple increases already in the past six months from Laya, GloHealth, VHI and Aviva.

It means the average premium for a family of two adults and two children has now doubled in the past three years to around €2,500 a year.

The latest increase could come in within weeks to counter the higher costs for insurers – leaving families who renew from this autumn being hit with three hikes in a single year.

The move to charge anyone with private health insurance for treatment in a public hospital was described by insurers as a "gamechanger" that risks destroying the health-insurance market.

A spokeswoman for the Department of Health confirmed to this newspaper that legislation to effect the change will be enacted by July 1.

The Government expects to raise €60m this year from the measure and €120m in a full year.

The move was signalled in last year's Budget, but it was not known how much of that extra cost would be passed on to customers – nor how quickly it would come into effect.

The department's spokeswoman said that at the moment half of private patients who stay overnight in public hospitals do not pay maintenance charges, which are up to €1,000 a night. A nightly charge of €75 applies for a public hospital.

But insurers said the move to impose the €1,000 charge would mean that even those who were being treated publicly would find that their insurer was charged for the stay in hospital.

Dermot Goode, of Healthinsurancesavings.ie, said this would mean a minimum of 15pc hike in premiums this year. This is on top of two increases already in the past six months from Laya (previously Quinn) and GloHealth, VHI and Aviva. The rises have been between 18pc and 20pc, he said.

The average premium for a family of two adults and two children has now doubled in the past three years to around €2,500 year. Around two million people have health insurance but they are reeling from double-digit increases this year and average rises of 20pc last year.

Mr Goode said a family on a more expensive plan costing €3,400 a year would be facing a rise in premiums of €500.

Aviva Health chairman Brian Dunne told the Irish Independent: "Any move to redesignate bed charges will inevitably and substantially drive up premiums because insurers simply cannot bear the cost and remain in business. It could well have substantial implications for the sustainability of the market."

VHI said: "If this goes ahead, it could mean that those with private health insurance are effectively being asked to pay on the double for a bed in a public ward – that is, through general taxation and their private health insurance."

And Catherine Whelan, the chief executive of the Independent Hospitals Association, which represents 21 private hospitals, said the move would cause thousands more to give up medical insurance.


She said 200,000 people had given up health insurance in the past two years, adding that there was a huge risk that private hospitals would be forced to close if there were fewer insured people in the market.

However, Health Minister James Reilly's spokeswoman called on insurers to negate the impact of the extra charge by cutting their own costs.

She said: "The minister is determined to address costs in the sector and has made it clear to the health insurers that significant savings can be made."

The Irish Independent also reports that NAMA has accepted an offer that will see it paid less than 25c in the euro in its first major sale of a portfolio of loans backed by properties in Ireland, including Garda Headquarters on Harcourt Street.

This means loans will be bought for less than one quarter of face value.

State-owned NAMA is understood to have agreed terms to sell the portfolio dubbed Project Aspen to a consortium made up of US private-equity giant Starwood Capital, Ireland's Key Capital and London-based Catalyst Capital.

The consortium is being advised by developer David Courtney, who was the original borrower or part of the original borrower syndicate on the Aspen loans.

He is working for a fee and is not part of the bid so will not end up owning any of the properties following a sale, people involved said. Borrowers are banned from buying their own debts from NAMA.

The loans have a face value of €810m but are being sold for €200m.

A spokesman for NAMA declined to comment, however, sources close to the deal say it is now moving towards closing with the Starwood-led consortium as preferred bidder after edging out US bond giant Pimco.

The loans are linked to development projects put together by Mr Courtney of real-estate agency Spain, Courtney, Doyle.

He was a significant player in commercial property during the boom and Project Aspen is backed by a mix of offices and retail units.

Loans secured on Harcourt Street Garda station in Dublin city centre are among the mix. The property is rented to the gardai.

There are also a number of Superquinn units in the mix.


Mr Courtney was part of a consortium that bought the Superquinn group for €450m back in 2005.

The company went into receivership in 2011 and was subsequently bought by Musgrave.

Project Aspen is the first domestic-loan portfolio to be sold by NAMA. It was put on the market in January, along with the smaller Project Club portfolio of loans with a face value of €350m

The sale of Project Aspen has been managed by US investment bank Eastdil Secured, a unit of US bank Wells Fargo.

Property advisers CBRE will run the Project Club sale.

NAMA expects to sell €3bn to €3.5bn of assets this year, as the agency moves ahead with the sale of two major portfolios of property loans.

The Irish Times reports that President Michael D Higgins has intervened directly in political debate on the euro zone debt crisis, criticising the response of European leaders and the actions of the European Central Bank. In some of his most forthright public remarks since taking office, Mr Higgins said the introduction of jointly-issued eurobonds could create scope to boost the economic recovery.

He also took issue with the failure of EU leaders to fulfil their pledge almost one year ago to break the link between bank and sovereign debt.

“It would have been of immense benefit naturally to growth, employment creation and investment if the ... commitment of separating banking debt from sovereign debt had in fact been implemented,” Mr Higgins told the Financial Times in an interview. “It would give you the opportunity to breathe and create growth in the economy.”

Mr Higgins’ remarks put him at odds with the response to the crisis of the German government, which has largely set the parameters for other member states.

The Merkel administration has faced down numerous demands for the joint issuance of sovereign debt and it is in the vanguard of the countries which are resisting demands for the ESM bailout fund to retrospectively compensate bailout recipients for taking on historic banking losses. Stating that Europe faced a “moral crisis” as much as an economic crisis, the President said European leaders needed to make up their minds on the type of union they really wanted. There was a need for “radical economics” and a “radical rethink” of how EU leaders were handling the economic crisis, he said.

The President’s concerns about the crisis in Europe are well known.

In a speech to the European Parliament two weeks ago, he said Europe’s citizens were threatened with an unconscious drift to disharmony, a loss of social cohesion and a deficit of democratic accountability.

While he called then for the idealism, intellectual strength and moral courage that drove Europe’s founding fathers to be reasserted, he went further in his interview by directly tackling some of the most difficult policy questions faced by EU leaders. He also questioned Europe’s basic economic model, saying there was a requirement for a multi-layered approach.

“There is a real problem in what was assumed to be a single hegemonic model,” he said. “The unemployment profile in Greece is different from the unemployment profile in Ireland. You need a pluralism of approaches.”

Adding his voice to the fractious debate over the mandate of the ECB, the president said the Frankfurt-based central bank should act to fuel economic growth. Ireland was unusual in its acceptance of such a high degree of cuts when compared to other euro zone countries, he argued.

“The polite version is that we are pragmatists,” Mr Higgins said. “What we really need now is something that goes beyond outrage and recrimination.”

The Irish Times also reports that declarations made by Google to a House of Commons inquiry that advertising sales are handled by Dublin-based staff have been brought into serious question, following allegations that much of the work is done by the company’s London office.

Last night, the Commons’ Public Accounts Committee announced that it will demand that a senior Google executive and the company’s auditors, Ernst & Young, return before them to clarify evidence that they gave on the issue late last year. Following months of inquiry, Reuters last night reported that it has found that many of the staff involved in closing advertising deals are based in London, which, if confirmed, could see Google facing millions in extra taxation from British tax authorities.

Last November, Google executive Matt Brittin told MPs: “Everybody who buys advertising from Google [in the UK] – because that is how we make our money – buys advertising from Google in Ireland.”


Last night, Google denied that it had misled MPs, saying the London-based staff are “digital consultants” who do not handle sales contracts, though advertisers have told Google that they never deal with anyone in the company’s Dublin offices. Two years ago, the internet search engine giant paid £6 million in tax to the UK taxman on the £395 million it declared in UK revenue. Between 2006 and 2011, the company generated £11.5 billion in the UK, yet paid £10.3 million in tax, it has been reported.

“We will need to very quickly call back the Google executives to give them a chance to explain themselves and to ensure that actually what they told us first time around is not being economical with the truth,” said the chair of the Commons’ PAC committee, Margaret Hodge.

Ernst & Young, meanwhile, will be challenged to back up its statement to MPs that they had made their own checks on Google’s London operations: ”The evidence they gave was clear and unambiguous,” Mrs Hodge declared pointedly last night.

Facing detailed questioning from Mrs Hodge last November, Mr Brittin insisted that “anybody who buys advertising from us in Europe buys from Google in Ireland from our expert team”, even if the are “encouraged” to do so by London staff.

“Nobody [in the UK] is selling or promoting the products, but they are definitely encouraging people to spend money on Google. No one is buying from them,” he told the Labour chair of the influential Commons committee.

The Irish Examiner reports that it looks as if the stress tests of the Irish banks will be conducted later this year before the country exits the EU/IMF bailout programme in November.

The last round of stress tests carried out in March 2011 found that an extra €24bn in capital was needed for the three pillar banks.

Preliminary planning and discussions have now begun on the next set of stress tests. One view is that the Irish economy needs three functioning banks.

Consequently, if there is a capital shortfall following the stress tests, the next step should be to quantify how much capital is needed and go about raising that amount either from private sources or through an EU fund.

However, the other view is that the Irish banks already have very aggressive provisions in place. Therefore, if more capital is needed then questions should be asked about that bank’s future.

Bank of Ireland is 15% owned by the State and the closest to returning to profitability and making a full return to private ownership. But AIB and Permanent TSB are both 99.8% state-owned. Permanent TSB has submitted a restructuring plan to the European Commission that would see it split into a good bank and bad bank with a separate division for its British business. It faces the biggest challenges among the domestic banks in returning to profitability and carving out a viable future. One of the views being put forward is that, if Permanent TSB needed capital, then it should be turned into a bad bank. Its good assets could be transferred to one of the other banks. It would then be used as a rundown bank for the troubled assets of Bank of Ireland and AIB.

The benefits of this approach is that the capital requirement for a rundown bank is only 4% whereas the minimum core tier one capital for AIB and Bank of Ireland is 12%. Consequently the cost of capital would be much cheaper to manage a much greater amount of assets. Moreover, Bank of Ireland and AIB, free of troubled assets would return to profitability much quicker and would be much more beneficial for the wider economy.

However, there would be huge issues around the transfer of assets and how much PTSB would pay for these assets and whether it was compatible with EU state aid rules. Moreover, it is not certain the Government would want another bad bank following the liquidation of IBRC.

Also, it is thought the European Commission wants PTSB as a third force in Irish banking. According to one source nothing has been decided and the Central Bank has not developed any policy on this issue. The Central Bank declined to comment.

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