Tuesday, November 30, 2010

The Bailout

This EU/IMF bailout stinks for a whole lot of reasons. Our great leaders went into the discussions and seemed to be happy to give away everything as long as corporation tax wasn't touched. I am not at all convinced by the arguments around corporation tax and the reasons for keeping it at 12.5% but I am pretty sure that flushing the country down the toilet isn't one of them. And even after the draconian measures being imposed on us I'm pretty sure that the bailout isn't going to fix Ireland, Irish banks or stop the spread of "contagion" to the rest of the EU.

As I have harped on about before, the entire mess goes back to the disastrous bank guarantee in September 2008. Turning private debt in the banks into sovereign debt owed by the tax payer was the single most stupid thing ever done by Fianna Fáil and it's not like there aren't plenty of other options to choose from. This has left the tax payer on the hook for the banks' massive borrowings still outstanding to European banks. This is where the biggest stink in the bailout comes from.

We are being loaned €22.5B from the IMF and a further €45B from two EU funds. On top of that we have to immediately throw most of the contents of the Pension Reserve Fund into the black hole of the banks. All of this bank funding is required to enable the German, French and UK banks as well as the ECB to be repaid at some point in the future. So the net result of the liability to the Irish tax payer is that other EU banks remain solvent. Seems to me like that's pretty good leverage to have in negotiating terms on these loans. Instead the government played meekly and took whatever was offered without flexing any muscle at all.

Secondly we have to ask, what is the price being paid for this money? We the tax payer are being lumped with an average rate of 5.8% for the €67.5B external bailout. That's just under €4B per year in interest to the EU/IMF. But when you look at long term financing costs for Germany they come in at around 2.67% on their 10 year bonds, so we are being gouged by our EU partners by over 3%. Hardly, seems like a community coming together to help each other out. Again we should have turned around and say that unless the rate was closer to 3% that we would just default and bring the whole Euro house of cards tumbling down.

Finally, how will this bailout actually help Ireland and our deficit in current spending? The fastest way to close the gap between taxation and spending is to get sustainable growth back in the economy and the best way to do that is via targeted stimulus using the NPRF. Having now blown our main avenue for growth on the banks we are now stuck in a zero/low growth scenario with higher and higher interest payments swamping any increase in taxation due to growth. That means we have to raise additional taxes and since corporation tax is sacrosanct, that means extra income tax, PRSI, property taxes, VAT, excise and the like for the ordinary punter.

We are now in a downward spiral from which there appears to be very little hope of exiting. Thanks a bunch Soldiers of Destiny.

Wednesday, November 24, 2010

Protest time again

This coming Saturday, ICTU are holding a protest march from Wood Quay to the GPO. This comes almost a year after the last major incident where I spent a day in the pub North doing Xmas shopping cold picketing a building site on Pearse Street. The upcoming demonstration, while nominally about Congress' alternative to the austerity measures, is really the best opportunity for the general public to register their disgust with the decisions and plans of the current government.

Over the last 10 years, the Unions, both public and private sector, have not exactly covered themselves in glory. The fiasco of benchmarking and partnership along with lightning strikes and blue flus have not endeared the organisations to the general public. At this point the sight of Jack O'Connor, David Begg and Blair Horan on the TV has most people either reaching for the remote or throwing something at the screen.

However, this protest has to be about more than the Unions. These organisations are the only groups who are able to mobilize large numbers of people to form the core of a protest. Compare this Saturday's events with the Right to Work events last May and June where there was never more than 1,000 people in attendance and in may cases substantially less. The involvement of fringe groups such as SWP, Eirigí and Anarchists only puts people off attending. The Unions, despite all their faults, give some level of legitimacy to the event.

So turn up on Saturday. Bring a sign and feel free to put an anti-Union slogan - you won't be alone. Together the masses can have a say and hopefully put an end to this disastrous government and their failed policies.

Monday, November 22, 2010

Insert coin to continue

I go away for a quick weekend trip to Cork and Galway and I come back to Dublin to discover the country has fallen apart at the seams. Well nothing like playing catchup on about 1000 blog posts, 10,000 tweets and 100,000 politics.ie posts. This is now the end of the end for this government. Gormley's statement this morning that he wants an election date in late January has given us all a target date to aim for. However, I'm still not convinced that we won't have an election this side of Christmas.

Somewhere around Enfield I switched over to the radio, having been listening to Grand Magus' awesome Hammer of the North up until then, to catch the end of the news and some of Liveline. Firstly Mammy O'Rourke, who's constituency I had just zipped through at 120km/h, was blathering on about the Fianna Fáil leadership issue and how they would take stock in the New Year after the budget had been passed. Talk about not getting it - the people don't care about internal FF shenanigans anymore and with the Greens having put a sunset clause on this Dáil sticking to her timetable would leave them dealing with a leadership heave right in the middle of an election campaign.

Then Sean Power came on Joe Duffy and suggested that Cowen resign with almost immediate effect, the parties all come together and pass a budget to appease the IMF and then we have our election next year. The problem with that is if Cowen is gone then so too will be support from Lowry and Healy-Rae. Thus after the by-election in DSE spells the game is up with 82 opposition (51FG, 20L, 5SF, McGrath, O'Sullivan, Behan, Grealish, Lowry, JHR) and only 80 government.

Later on this week I'll get around to the IMF issue but at the pace things are moving right now that will be very old news by then.

Friday, November 19, 2010

Green Flags and Crocodile Tears

I really don't know where to start on this one. Yes, the EU-IMF bailout that we all thought was going to happen has come to pass. Yes, the banks and our governments (mis)handling of them over the last 3 years or so has dug us into a hole. Yes, people are emigrating in droves not seen since the 1980s and it government policy seems to rely on this continuing. In short, Ireland is banjaxed.

But would people ever give up with the maudlin appeals to Yeats, 1916, Wolfe Tone, Brian Boru and Diarmuid Ua Duibhne. Wrapping the green flag around you, while somewhat cathartic, does nothing for you, for Ireland or in fact pretty much anyone. We the people have landed the country in its current state through a decade or more of gorging on the supply of cheap credit made available since the introduction of the Euro. Government policy encouraged this mass orgy of financial decadence through various tax breaks, hair-brained schemes such as the SSIA and Decentralization, and pro-cyclical spending but we have to also take some level of personal responsibility.

It is a disgrace that a relatively wealthy, 1st world country such as Ireland has need of the services of an organization such as the IMF. It is a disgrace that such an organization needs to exist at all in the first place. But people are people and greed is greed and the world keeps turning. The crocodile tears of the booms greatest cheerleaders should not make us loose sight of the fact that we are still in a far better place than probably 90%+ of the worlds population.

Wednesday, November 17, 2010

The End

In 1967 The Doors released their debut album featuring the hits "Break on Through" and "Light My Fire". During the late 80s and early 90s I went through my Doors phase and became quite the fan of the album and especially the final track, the epic "The End". On the bus into work today the song popped back into my head and I noticed how prophetic Jim Morrison had been in that song with regard to the Irish economy in 2010 and it could be interpreted as a lament being sung by Lenihan and his Fianna Fáil comrades.

This is the end, beautiful friend
Fairly obvious opening line on the current state of chassis.

This is the end, my only friend, the end
So who is this only friend? At this point the public have turned on FF as have the bond markets. Who is left? The EU, the ECB, the IMF? Or is it just the Irish bankers and developers?

Of our elaborate plans, the end
Plans to dump €60B+ of additional debt on the shoulders of the Irish tax payers without a whimper from the coping classes.

Of everything that stands, the end
From a FF point of view, the only thing that counts is being in charge. Here Morrison/Lenihan is lamenting the imminent destruction of the party. The trappings of power will come crumbling down as the deFFification of society begins starting at the top with the TDs.

No safety or surprise, the end
No surprise, we've known for a long time how banjaxed the country is but we've decided to keep the populace in the dark and there is no safe route back to prosperity. It's the EU, the IMF or default and darkness.

I'll never look into your eyes again
Cowardice from those FF TDs who will decide to retire before the next election rather than face the wrath of the electorate.

Can you picture what will be
So limitless and free

Limitless national debt as billions are pumped into banks while schools and hospitals are left rotting. Perhaps a touch of irony with the use of the word free.

Desperately in need of some stranger's hand
In a desperate land

Again a reference to the strangers of the IMF coming in to this desperate land to sort out the mess left behind.

After this point, the song meanders into various psychedelic images of Roman wildernesses, highways, snakes and a blue bus. Not really sure how this fits with my chosen narrative so I'll just skip on ahead. The Oedipal section is even more open to interpretation but I'm just going to say the role of the Father is played by the Irish economy and the Mother is the Irish people. Morrison/Lenihan winds up the song with a return to the main theme - this is the end of the Republic of Ireland in its current state.

The end of laughter and soft lies
The end of nights we tried to die
This is the end

This analysis probably makes it clear that I wasn't so good at the old English poetry for the Leaving Cert. Best stick to facts and figures in future!

Monday, November 15, 2010

Little old Louth

Once upon a time I would have considered Louth, the smallest county in Ireland, to be quite the boring place electorally. From 1982 to 2002 there were 2FF, 1FG and 1Lab returned (in various orders) over the course of the 5 elections. Despite being on the border the SF vote never materialized into a serious challenge for a seat since the heady days of the civil war.

Then in 2002, Arthur Morgan made the breakthrough for Sinn Fein and ousted Michael Bell, to take a seat which he held in the 2007 election. Following the boundary review, the Louth constituency was extended to a 5 seater with some sections of Co Meath near Drogheda transferred to the constituency. The excitement continued when the resignation of John O'Donoghue resulted in the appointment of "Captain" Seamus Kirk as Ceann Comhairle, effectively turning Louth back into a 4 seater. At the time, this would have been seen by FF as a way to try and return 3 deputies from the constituency as they would have hoped to get two elected on preferences. Obviously with the further decline in FF support in the polls, it is still highly likely that Dermot Ahern will be re-elected thereby returning two FF TDs in Louth.

Last week, Morgan announced that he would not be seeking a nomination for the next general election, citing his desire to get back into the family business. To most that was seen as a passing of the torch to the next generation in Louth SF, with Tomás Sharkey most likely to win the nomination. Having won a seat on the council in 2004 and then almost doubling his vote in 2009, along with his exposure during the European elections he would have been seen as a fairly safe selection to replace Morgan. However, yesterday, Gerry Adams threw a massive cat amongst the pigeons by announcing that he was going to seek a nomination in Louth, resign as an MLA and then abdicate his seat in Westminster should he be elected to the Dáil.

So looking at the next election we have the following possibilities
  • FF - Kirk automatically re-elected. Ahern and AN Other on the ballot paper. It would be a massive admission of defeat not to run two candidates
  • FG - Fergus O'Dowd and AN Other. Mairead McGuinness ran here before, but I don't see her giving up the MEP role that easily.
  • Lab - Ger Nash - with the additional commuter votes in the Drogheda area, Nash should be in the running this time out.
  • Green - Mark Dearey, recently appointed to the Seanad
  • SF - Gerry Adams. The big question is whether SF will play it safe and have Adams romp home topping the poll or will he try to capitalize on his personal vote and bring in Sharkey as a running mate.

At this stage, based on a two North, two South split I'm calling it Ahern and Adams as the Dundalkites and O'Dowd and Nash getting the nod in Drogheda with Kirk as #5. However, as always, candidate selection will make all the difference and you could easily see Nash loosing out to a 2nd SF or a strong 2nd FG candidate. Watch this space with interest.

In terms of Adams' political future in the south, it is somewhat odd that he chose to land in one of the safest SF seats rather than try to win a seat that would have been considered un-winnable for the party up until now. Places like Dublin West, Dublin Central and Cork North Central would all be potential gains. I guess the long game is getting above 7 TDs elected and then having Adams act as de-facto leader of the opposition against an FG/L government since FF won't really be in a position to say much, due to the mess they will have left behind. Running Adams in a place where he might not have won would scupper this strategy. Who'd have ever thought that SF can play it safe at times?!

Monday, November 8, 2010

We're all doomed!

As a kid I probably watched a few more episodes of Dad's Army than I should have. One of the characters had a catchphrase of "we're all doomed" every time a crisis of some sort arose. Well Prof. Morgan Kelly from UCD is a bit like Private Fraser except that in most cases Kelly is right when he utters the magical phrase. He is the person who has been proven most accurate in his forecasting of the downfall of the Irish economy in the last number of years. So when I read his article in today's Irish Times I was half tempted to just give up trying and emigrate. In it he reveals a few items that I had not noticed before and paints an extremely bleak outlook for the country for the next decade.

For instance, I hadn't realized that €55B in bank bonds were repaid in September with cash from the ECB. This item of news seems to have been kept fairly quiet for as Kelly says, now that the investors have been repaid we have no leverage over them any more. No wonder they feel they can get away with demanding 7%+ yields on our debt when they see what a pushover the Irish government is.

The most damning part of the article is where Kelly states: "every cent of income tax that you pay for the next two to three years will go to repay Anglo’s losses, every cent for the following two years will go on AIB, and every cent for the next year and a half on the others". That's six years of blood, sweat and tears by Irish workers being flushed down the toilet to rescue banks from the folly of their actions. It really does make you weep.

His future of an extremist right-wing party rising from the ashes of FF and FG is worrying. An Irish Tea Party movement, or worse an equivalent to the BNP, would not leave us in a nice place. The ongoing alienation of the poor through frontline cutbacks and high levels on long term unemployment will only speed this process up. As has been shown time and again throughout Europe and beyond, hordes of disillusioned young males will end up taking extreme positions.

The one vague positive, and it really depends on how you look at the issue, is that he predicts a complete collapse in property prices in the next few years as mortgages dry up entirely and we are left with a cash only market. As someone who owes the guts of a quarter million on an ex corpo house in Dublin 5 that is not good, but at the same time with the few shekels I have managed to put aside since purchasing about 7 years ago, I'm looking good for buying a mansion in Foxrock by 2013.

I'm currently reading Animal Spirits by George Akerlof (who shared the Nobel Prize with Joseph Stiglitz, friend of NAMA developers, in 2001) and Robert Shiller about psychology and the economy. So far I'm only a couple of chapters in but they focus on fairness and confidence as being two key traits to economic recovery. Kelly's article certainly outlines how unfair the system has been to many people, and will continue to be into the future. Unfortunately the article is low on the confidence generating stakes as well but in a basket case like the Irish economy at present, that is actually fair as well.

I wonder if Morgan Kelly sings an updated "Who do you think you are kidding, Mr Trichet?" on his way to work every morning.

Saturday, November 6, 2010

What a week

It really has been one of those weeks. Lets just take a minute to review


The week started with the dousing of Mary Harney with red paint at a sod-turning in West Dublin. I can't really condone Cllr Louise Minihan's shenanigans at the event, especially seeing as she was there in an official capacity representing the city council. However, considering most people wouldn't have heard of Minihan and Eirigí before this week, the publicity stunt seems to have worked and I am not sure that the Lord Mayor has any sanction he can impose on the unruly Councillor.


Tuesday saw the unexpected resignation of Dr Jim McDaid, FF deputy from Donegal North East. Having been an outspoken opponent of many of the policies of the current government and being long of the opinion that a general election was required, it was surprising to see him leave rather than vote against the budget and precipitate an election.


USI managed to organize their largest march in years with around 20,000 students taking to the streets protesting against education cut backs and the recently announced plans to increase registration charges by up to €1,500 from next year. The entire event was overshadowed by the occupation of the Dept of Finance by a small number of protesters and the heavy handed Garda response featuring the riot squad as well as mounted and canine units. This video on YouTube does not show the boys in blue in a terribly positive light. One wonders if they decided to use the students as practice in case a more aggressive protest against the budget happens in a few weeks.


Thursday brought the passing of the DSW by-election writ while the other three vacancies were all voted down. All along the government have used the excuse that a by-election would distract from the current important business and had nothing at all to do with FF hanging on to power at all costs. Now with the distraction of having one by-election, what's the harm in having all of them at once? Oh yes, the spectre of the government falling and all the FF deputies having to face the music.


Like the main evening news, the week ended with a light hearted "and finally" story with the let them eat cheese fiasco. Considering that this is an event that happens every year under the radar it seems a bit stupid for a Minister to announce it in a Marie Antoinette moment. Brought a smile to my face and about a million bad puns to the Twitterverse.

I wonder if next week can match up to the excitement of the last few days. I hope not as there is almost too much going on to keep track of!

Tuesday, November 2, 2010

Passing the Budget

This is not a post on specific measure that may or may not be in the budget. That will happen shortly. What I want to think about today is the politics and numbers of getting the budget passed in December as any loss of supply on a finance bill requires immediate dissolution of the Dáil and a General Election.

At present things are finely balanced in the Dáil. Jim McDaid's resignation this morning means the government have an 82-79 majority which relies on the 3 un-whipped FFers (Devins, Scanlon and McGrath) and two independents (Lowry and Healy-Rae). When it comes to the budget none of these votes can be counted on by the government side. The two Sligo deputies are the most likely to back Lenihan as they are only outside the party on health issues. McGrath is a complete wild card and unless something specific is promised to Tipperary South in terms of health or investment he could well jump ship. Lowry, with his half billion Tipperary Venue green lighted, is now good to face the electorate. Only Healy-Rae is likely to cling to FF as his seat is seen as the most vulnerable to a Labour bounce in Kerry South.

From the opposition point of view they should all be voting against the budget on a matter of principle and to pile the pressure on the above named wobblers. But a small part of me wonders whether it is in the best interests of FG and Lab to have the budget fail. Say the first vote fails on 7th December then the last possible date for the subsequent general election is Thursday 6th January. With Christmas and the New Year intervening I'm pretty sure the public at large or the foot soldiers doing the canvassing won't thank them.

Secondly, and more importantly, if a harsh budget is pushed through, we then move into by-election mode where the government are going to loose at least 3 of them. If they were to loose all 4 then it is all over straight away as the maths moves to 82-83. So facing this possibility the government may just cut its losses in March before holding the by-elections. Having a spring general election would allow the opposition to campaign on the unfair cuts and taxes imposed by the outgoing government, propose alternatives and still benefit from the savings made for 2011, or at least a period in 2011 before an emergency budget was put in place by whatever grouping takes charge.

Of course, if the High Court come back tomorrow and order the by-elections before the budget then we could be facing an general election sooner than we think.