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News : Irish Economy Last Updated: Nov 11, 2013 - 5:38 AM


Irish Bailout Exit: Doleful knell should ring in ears of 'victors'
By Michael Hennigan, Finfacts founder and editor
Nov 8, 2013 - 6:17 AM

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A grim looking Brian Lenihan, the late Irish finance minister, appears to be reading the rescue terms at the Ecofin special meeting of EU27 finance ministers which approved a bailout for Ireland, Brussels, Nov 28, 2010.

Irish Bailout Exit: The IMF completed its 12th and final bailout review for Ireland on Thursday and Enda Kenny, taoiseach, never sparing of a superlative when a more prudent term may have been more appropriate, declared  November 07, 2013, "a historic day" presumably ahead of a more historic day, December 15, 2013 when the IMF-ECB-European Commission bailout officially ends. However, while 260 boxes have been ticked on requested actions since November 2010, a doleful knell should ring in the ears of the self-proclaimed 'victors' as like a company that has been saved from the grim reaper by some financial help, downsizing and improvements in internal routines but has to still address a changed market situation, Ireland's biggest challenges are ahead.

Besides, unlike a company that can shed debt, Ireland's net public debt has risen as a ratio of GDP from 70.5% at end 2010, to a forecast 105.5% at end 2013, according to IMF data.

"Today is historic in the sense that we have come from a very difficult period," Kenny said, as if it's over.

Michael Noonan and Brendan Howlin, finance and public expenditure ministers, said in a statement: “This is a significant day, that many thought, and some feared, would never be reached. The effort of the Irish people in working towards this goal has been unprecedented."

They added: "Over the course of the programme, a wide range of structural reforms have been introduced across the public service, the economy and the financial system."

There have been no significant structural reforms so far - -  nothing comparable with the reform programmes implemented by Sweden and Finland in the 1990s.

Speaking on RTÉ’s Prime Time, Richard Bruton, enterprise minister, said progress on the Legal Services Bill, introduced in 2011, had been delayed because the priority was to bring in the Personal Insolvency legislation to deal with families in distress - - what a bullshit excuse!

The courts and the big professional firms have been have been heaving with activity through boom and bust, with the Exchequer picking up big tabs and the minister says the Government cannot multitask during an economic emergency?

The Competition Authority said in April 2012:

In November 2010, the Government signed a Memorandum of Understanding (MoU) with the EU/IMF. The MoU included a commitment that, by the end of the third quarter of 2011, the Government must establish an independent regulator and implement the outstanding recommendations of the Competition Authority. In October 2011 the Minister for Justice, Equality and Defence, Mr. Alan Shatter, TD published the Legal Services Regulation Bill."

The bailout Troika is still pushing for value for money as the public drugs’ bill has risen to €2bn from €332m in 1997; €850m in 2002; €1.7bn in 2008. That’s only part of the cost as members of the public have had to pay themselves excess prices.

Last June, half a decade after the crash, the Health (Pricing and Supply of Medical Goods) Act 2013 provided for the potential greater us of generic drugs. However, there remained a bizarre detail according to The Irish Times:  "generic drugs cost up to 90% of the price of the branded equivalent, the savings accruing from this switch will be relatively small. In contrast, the cost of generic drugs in Ireland is up to 24 times the price in the UK."

As for public service reform, anyone who would expect a group of people meeting in a room for most workdays over 2 years having an argy-bargy on work practices, many arcane, to produce a credible blueprint to modernise a large organisation, is naive.

Public debt and unemployment will remain high for years to come; private sector debt is high with unresolved mortgage and SME loans crises while delusionally expecting Americans firms and university research to provide a jobs engine.

Craig Beaumont, IMF mission chief Ireland,  said in Dublin on Thursday that high unemployment is the biggest challenge facing Ireland.

"The most important challenge we see coming out of this programme is the high level of unemployment,” said Beaumont. “It remains high and three-fifths of the unemployed have been out of work for over a year. Some of them will find it quite difficult to regain work even as employment starts to recover.”

While acknowledging that good progress had been made in repairing the economy, Beaumont said the Government still has work to do to repair our public finances fully.

“Public debt is over 120% of GDP and the deficit is still quite high. So the Government will need to continue its fiscal consolidation efforts in the next few years,” he warned.

Fianna Fáil, Ireland's dominant political party until the bust, had election slogans respectively in 2002 and 2007: 'A Lot Done , More to Do' and ‘Now, the NEXT STEPS….’ 'The Music Box,' a Laurel and Hardy short film comedy released in 1932 could be a metaphor for the way the Irish economy was run and it's clear so far that there has not been durable change. The route to making Ireland a better place remains to be decided.

The Wikimedia Commons picture of the Los Angeles steps that were used in the movie (see bottom of page) is from 2009 and Wikimedia describes the plot!

Meanwhile, the National Economic and Social Council, which comprises the social partners and provides reports to the Government on strategic issues for economic and social development, says in its latest report published on Thursday that Ireland needs deeper reform and further institutional innovation.

The report  says:

Overall, the journey from boom to bust, and the struggle to find a way through the consequent five-part crisis, has highlighted the fact that strategies and policies can only be provisional starting points; what is critical is good systems for monitoring success and failure and institutional arrangements capable of review, learning and policy adaptation. The Council wants both to draw attention to that feature of the current context and be a part of the necessary system of evidence gathering and review."

The report highlights the need to integrate and balance three different types of public-sector reform: (i) fiscal-driven reform delivering fiscal consolidation and discipline; (ii) substantive reform of services and programmes to underpin future prosperity, high participation and social cohesion; and, (iii) system-oriented reform for the delivery of high-quality services, continuous improvement and policy adaptation.

Most Irish economic data cannot be taken at face value because of distortions caused by profit shifting by multinational companies and in services tax-related booking of foreign sales in Ireland that results in over 40% of Irish services exports and related output being fake. In 2012 Google diverted 41% of its global revenues to Ireland and Microsoft diverted 24% of its global revenues in 2011/12.

Ministers, commercial economists, public officials including the Central Bank go along with the fairytale of bumper exports that are virtual not real. 

Last month John Whelan, the outgoing chief executive of the Irish Exporters Association, commented: ‘’The jewel in the crown of Irish exports is (sic) our computer services exporting companies , whose exports powered ahead by 18.9% in the quarter and brought the year to September computer services exports up by 11.8% .This sector is the most important of our services exporting activities and now accounts for just under 42% of total services trade.’’

This is in the realm of fantasy that shows the enduring appetite for fairytales through boom and bust.

Science/Enterprise policy

  • Irish Innovation: Evidence of science policy failure mounts - - the issue here is not on what should be spent on science but on the obsession of public enterprise policy with high tech and the commercialisation of research.

  • US company profits per Irish employee at $970,000; Irish tax paid at $25,000 - - FDI is no longer a jobs engine; corporate tax avoidance is distorting key metrics of economic performance while beyond crisis fire-fighting, ministers can only depend on others to deliver 'rocket' growth.

  • Top 5 US tech firms held $515bn in cash at end June 2013 - - US non-financial companies rated by Moody's held $1.48tn in cash at the end of June 2013, the rating agency says in a new report, "Cash Pile Still Growing, at $1.48tn" (only available to clients). The amount sets a new record, having climbed from $1.45tn at the end of 2012. The top 5 tech firms held $515bn and 61% of the total cash hoard is technically held overseas to avoid paying US corporate tax.

  • Google booked 41% of global revenues in Ireland in 2012; A leprechaun's gold? - - Google booked 41% of its global revenues excluding Motorola, in Ireland in 2012. This manna from the heavens is officially a result of increased competitivness and a related plunge in unit labour costs. It is neither and from an Irish viewpoint it is wealth that is as durable as a leprechaun's gold.

  • Irish Innovation: Taxpayer to fund more than 70% of €300m joint public-industry project centres

  • Irish Innovation: No boom in STEM jobs in Ireland - - Irish Innovation: Almost two-thirds of the 9.3m people in the US workforce who had STEM (science, technology, engineering, or mathematics) degrees in 2010 were employed in non-STEM occupations while in many countries including Ireland and Australia, the importance of producing more maths and science graduates is often stressed. However, in both Ireland and Australia, there haven't been jobs booms in the sector despite warnings from insiders and high levels of public funds.

  • UK tech employment at 3.6% of total workforce - - Jobs in UK tech companies rose from 915,000 out of a total workforce of 27m in 2010 to over 1m from 28m in 2013 - - 3.6% of the current workforce, according to a report from Markit, the research firm, produced for KPMG, the Big 4 accounting firm.

  • Japan, Finland top in literacy and numeracy skills; Ireland among laggards - - A groundbreaking international survey of numeracy and literacy skills in 24 countries, organised by the Organisation for Economic Co-operation and Development (OECD), has found that Japan and Finland were in the lead while Ireland was below average.

  • Women, African-Americans and Hispanics/ Latinos are unwanted in Silicon Valley - - It's not new news that women, African-Americans and Hispanics/ Latinos are generally unwanted by the tech elites in the Silicon Valley area of Northern California but following the announcement of Twitter's planned IPO (initial public offering) renewed focus has been given to the issue because of a public spat between Dick Costolo, Twitter's CEO, and Vivek Wadhwa, an Indian-born entrepreneur turned academic, over the lack of women on both the board of the micro-blogging site and its senior management.

  • Number of early-stage entrepreneurs in Ireland is low and falling - - The proportion of people in Ireland who are early stage entrepreneurs has fallen (6.1% in 2012 from 7.3% in 2011) and Ireland’s ranking against other countries has declined. Ireland is now ranked 18th among the 34 mainly developed OECD countries, 14th of the EU-27 countries (of 22 countries included) and 6th of the pre-2004 EU-15

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