IMF: 4 Year Plan Wont Work! December 17, 2010
Posted by Scandalcentral in Banking & Finance, Current Affairs, Politics.Tags: Four- Year Plan, IMF
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The IMF today rubbished the Government’s four-year recovery plan, finding that the Government wont be able to meet the 3% debt to GDP target by 2015, one year after the plan is set to end! The IMF has found that based on our current plans, Ireland will be only at 4.8% debt to GDP by 2015, highlighting the inadequacy of the Government recovery plan.
Ajai Chopra announced that based on IMF targets Ireland would require extra measures, on the medium term, it order to get the economy in line with the EU growth and stability pact. Chopra also slammed the Government assumptions as part of the four- year plan. His report agreed with the EU in that Ireland will not have growth of 1.75% next year as assumed by the Irish department of finance, but in fact will have growth of just 1%. The report also finds that future growth estimates are also too ambitious. These findings alone prove that the four-year plan is pure fiction that wont work and shows that a new plan is needed from the next Government in order to properly sort the fiscal and banking crisis.
The report also found that the Irish banking system is oversized and must be tackled. It also concluded that our banks are holding a large number of “vulnerable assets” The report was quite damning in finding that the states banking problems has eroded the state’s credibility.
The report also finds that the threat of contagion is tragically very high and that other state face similar problems as Ireland.
Overall, the report highlights many issues that Ireland has not yet addressed. It will be unwelcome for the Government, who will now have to publicly acknowledge that their plans just wont work!
Is the end really in sight? November 21, 2010
Posted by Scandalcentral in Banking & Finance, Current Affairs.Tags: Bank, Brian Cowen, Brian Lenihan, IMF, Ireland
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The past few days have been historic for Ireland. They will go down in history books as being one of this proud nations darkest and bleakest days. The problem, is that the worst is yet to come.
Over 2 years ago, this Government offered us a hurried solution to an unfolding banking crisis: an irrational bank guarantee scheme followed by a ghastly “recapitalisation” programme and NAMA. Today, more than ever, the question must be asked, why was Anglo Irish Bank not allowed to fail? Why were subordinated bondholders protected? Why were the bondholders not ‘burnt’? If the above questions were properly answered 2 years ago and appropriate actions taken, we may not have to come to see the events of this week unfold. A combination effort may have even worked. Anglo and Irish Nationwide should have been wound down. AIB and other systemically important banks should have been nationalised, at a cost much less than the now famed recapitalisation disaster. However, it is now sadly far too late for what if’s. The Government made irrational decisions in the middle of the night September 2008 and ever since we are paying for their gross incompetence. This week, we began paying a price simply too high for the vast majority of voters: our sovereignty.
The issue I have with this whole bailout, is reality. The Government this week initially declared that the IMF were not here to bail us out. By the end of the week, they were only here to offer us a ‘loan’ of sorts but it was certainly not a bailout. It is a bailout. The issue is, that a bailout is not the required solution.
A bailout will buy this nation time. Very expensive time, that will be paid back for years to come at interest rates that I don’t believe this nation can afford. What should be done is far more complex. Perhaps we will yet see this happen. Firstly, we need to tackle the issue of the banks bondholders. No banking bondholders in the world has ever seen its money so well protected, this must end. The Government needs to totally redraft its macro banking policies which are fatally flawed. The markets will continue to over price us unless this is sorted. It’s somewhat ironic, that all this week the EU-IMF team are looking through the books to find out how bad the situation really is, before telling Brian Cowen what needs to be done. Why did Brian Cowen not get his team to do this 2 years ago? If a full analysis of the banks, economy etc had been done, perhaps some of the flawed decisions of Brian Lenihan would not have been made. This week ended the idea that Brian Lenihan was doing a good job. I personally never believed he was doing a good job, many of my avid readers are well aware that I felt he was a joke candidate for the most important position in Government. He has no relevant qualifications are hasn’t had a clue what he was doing over the past 48 months. He relies on a few advisors who prep him well. The only thing he is good at is seriousness and sincerity. I’m afraid our need for that is long gone. I would love to ask Lenihan about quantitative easing or the fact that interest rates will rise over coming months and what he expects this impact on Ireland too be. The sad fact is that he was always out of his league. As much as Cowen and McCreevy were in their days. When we employ buffoons to run our economy, the result is inevitable.
What saddens me further is that we never learn. I read an article in B&F magazine yesterday to my horror. It ran a story on the merits of Joan Burton (Recently described as the human vuvuzela) as the next Minister for Finance. The very thought of yet another unqualified trumpet running our economy is mind-boggling. In the above mentioned article I read, Burton herself admitted that Labour if in Government would not look to ‘burn’ the bondholders, even though every major economist in the nation including the likes of Dr. Constantin Gurdgiev has called for exactly this action to be taken.
The end of the crisis is not in sight, unless Ireland is forced to make serious reforms to our banks, economy and public service. I don’t believe the IMF will force us to close hospitals, however I do believe they will examine our public service in detail and decide to slash and burn the endless waste that exists. Ireland partied with the big boys during the boom, now that we have crashed it’s time to pick up the tab. It’s a great pity that this all could have been avoided, if the Government had taken the right decisions over the past decade.
All over? November 18, 2010
Posted by Scandalcentral in Banking & Finance, Current Affairs.Tags: Economy, IMF, Ireland
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So it’s true. The IMF have arrived.
The ultimate shame has hit Ireland. Many months ago we laughed at the Greeks, the whipping boys of Europe. Today we join them, maybe even requiring a larger bailout than even they needed. The only words that each Irish person should feel tonight is shame, embarrassment and anger. The sight of John Bruton is tears on the news earlier truly summed up the dire situation we are in. The lack of a co- ordinated Government response is horrifying. Brian Cowen today appeared to continue the charade that the IMF are only tourists here on a holiday. He appeared lazy in front of the media declaring that the Government was in control and would smooth this bump over as if we had a flat tire. The truth is that the wheels fell of this vehicle a long time ago.
What’s even more amusing is the reaction of the people, which has been totally converse to the Greeks. Greece, once bailed out, hit the streets to protest. Civilians were killed in the mayhem. Here, there is no talk of protest. The Irish people appear willing to accept that there is no other option. The idea that we as a nation can accept the presence of the IMF with such grace highlights the sheer welcome this nation gives to any visitor. Even when down, we still offer the Cead Mile Failte to our guests, even if they possibly might end up slashing and burning our public sector. I must say I do feel proud of our nation as to our reaction, pride is very far from what I feel for the Government, developers and bankers tonight.
The question of sovereignty tonight is key. The debate over whether we would retain it or not has already begun. In my view, if the country does get bailed out to the supposed tune of up to €90 billion, we couldn’t surely retain budgetary control. Naturally, it appears the Government is willing to sacrifice everything except out corporation taxation rates. I personally find this a little difficult to stomach. Are we as a nation really going to protect that one sector while potentially closing hospitals, schools, cutting nurses etc without any issue? The coming days will make clearer who bad things are and how severe the sacrifice of the Irish people will have to be.
Drowning as a nation?
Things can only get better? June 26, 2010
Posted by Scandalcentral in Banking & Finance, Politics.Tags: Austerity Measures, Budget 2010, Economics, Economy, Euro, Honohan Report, IMF, Recession, Regling Watson Report
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Clouds building over Euro-states?
The past few weeks have been somewhat shocking in terms of revelations. Both the Honohan report and the Relging-Watson report pointed the blame for our economic collapse at the doorsteps of Government policy, reckless banking procedures and lax regulation. The Government has defended itself by stating that they genuinely didn’t know any better and that they acted based on fatally inaccurate assumptions from different organisations like the OECD and even the Central Bank. Equally, they have tried to deflect all attention from the blame element of the reports to the slight commentary which praised the Government for its fiscal measures in the last number of budgets. In recent day’s the Government returned to the famous hymn sheet of “things are getting better” and that the Government has weathered off the recession. I fundamentally disagree.
Personally, I’ve grown tired of hearing this tripe about things improving. The simple fact is that it will take a long time for anything in this country to improve. I even wonder if the Government fully realises how long it will take us to overcome this massive crisis. For this has not only been a banking and fiscal crisis, it has been a crisis of faith and most definitely a crisis of belief. We have lost belief in ourselves, something the Celtic Tiger created. It made us feel invincible meaning when we were to fall, we were always going to crash. It also means that building the house back up will take a lot of time. The first step I believe is honesty from all parties.
Many people in this country don’t understand what has actually happened to the economy. They understand it has crashed and they understand who is to blame, but in many cases they are ignorant to the effects it will have over the next number of years. The opposition parties claim they are dying to get into Government to solve the crisis. It bewilders me as to why anyone would want to tackle this complete disaster nothing short of a basket case. Lets talk simple numbers. This week Ireland was borrowing a at dizzying 5.6% on our sovereign debt. We share the same currency as the rest of Europe and hence by extension to this theoretically the same level of risk, yet Germany is managing to borrow at 3% less than us. This has been the case for some time. The key worry is that the gap isn’t closing. The Government claims it has a handle of our fiscal crisis, yet why have the markets not reduced our borrowing costs to reflect this view? Perhaps because no one actually believes their Bertie-like spin. The next budget is approaching fast and it will be easily the worst budget in the history of the state in terms of pain to be felt by citizens of Ireland. The “Croke Park” deal has ensured that the public service must be spared all pain this time around meaning that other and in many ways more contentious issues must be tackled. So far the Government appear slow to reveal how exactly they will chop another 3 billion off our expenditure. It has been suggested that the old age pension might be cut of even scrapped. While I might be all for fiscal prudence, but there is no way that would be socially acceptable. Many in this country rely on the weekly pension as their only means of survival. The Government is acutely aware of this but will play its cards well so it secures a sizable cut to the state pension. Either way, if we are talking about the old age pension it means options are very sparse on the ground. This naturally lead us back to the McCarthy report, a report gathering dust which may (Will in my view) have to come into play. Right on cue, Colm McCarthy himself this week warned that as long as our borrowing remains above 5% things will remain “challenging”. However he failed to expand on what he refers to when he says challenging. One would have to assume that he is insinuating that unless the cuts continue the markets will not regain confidence in us.
Also right on cue the IMF have given their 2 cents declaring that “Staying on target is critical”, warning that now is not the time to be backing down from the continued austerity measures that must be implemented if Ireland is to reach the holy grail GDP target by 2014. One massive obstacle remains, which the IMF and also the OECD appear totally aware of. The Government is ignoring this scenario, but I wont. The IMF this week also gave this stark warning to both the Irish people and to the Government, even if the media seemingly ignored it. The Armageddon scenario is where GDP growth levels are lower than currently foreseen. For it is on these figures that the Government has made its predictions of how much cutting it must do over the next four years. If GDP is slightly lower than predicted it would mean the Government would have to reduce its spending by even more. What effect could this have well, to quote the IMF …“a fraying of the necessary social cohesion cannot be ruled out. For this reason, greater specificity on further proposed measures is necessary. Sustainable expenditure savings will be central, including through efficiencies in public services. Broadening the tax base for revenue enhancement will also be necessary” They have made it quite clear that many of the McCarthy proposals which have been sidelined now must be re examined, including the key public sector reform. The only political party which seem’s to really understand what that means is Fine Gael. Labour have continually failed to comment on what it would actually do, while the Government appears scared of its life of the Trade Unions. But serious reforms are a necessity. When the HSE was set up, nearly all responsibility went to them from the department of health including the management of our hospitals. Yet the Department of Health still exists in the same form as pre-HSE, yet now it’s only portfolio is of general health policy. It’s my argument that this also should be HSE territory and that the Department of Health should be disbanded. Just to quote you the figures, over 500 of the 650 staff have been retained. Ironically, the HSE has hired nearly 2,000 new management and administrative staff up to when the hiring embargo was placed. The claim is that the Department is solely responsible for the development of health policy while the HSE simply run’s it ship accorded to these rules. Duplication is rife, there is no doubt of that fact. This is yet another example of Government waste, but more importantly another example of inaction. If we are seeing inaction due to the unions, then that is disgraceful. Those that set up the union movement have only helped to destroy our economy along with the bankers and politician’s. The other key change the IMF hints at is the tax base. This can interpreted in some many ways, to quote Shakespeare “A devil can cite scripture for his own purpose”, how right he was. For Labour will claim this backs up their idea of taxing high earners into oblivion. Except they don’t call them high earners, they call them “The Rich”. For the Government (and to a degree Fine Gael) it backs up their idea of bringing some of the bottom 1/3 of workers, who pay no tax at all, into the tax system. I’m sure where Fine Gael and the Government will clash is how it should be done and how many should be brought into the lower rate of tax. I personally believe a third-rate of tax should be introduced of (roughly) 15% for the top half of the bottom earners. However I don’t believe anyone earning less than say, 17,000 per annum should be taxed. It’s unclear what the Government will do in this regard and only time will tell. Either way, don’t expect Labour to commit to anything!
The next budget is going to be very tough for the Government to get through Dáil Éireann but so will budget 2012, 2013 and 2014. The interest we are and will be paying on our borrowings is going to continue to cripple this state for a long time to come. Much of the public doesn’t appear to understand this. What I find quite humorous is that more and more of the electorate are siding with left leaning parties, but I fail to see how they could possibly be in Government when massive cuts must be made. I can’t see Joe Higgins helping our his “workers” by reducing their tax credits or health benefits or shutting Garda stations or any of the other measures that will have to be undertaken. I equally struggle to see Labour sitting in Government, simply because I don’t see what they can do in the current economic environment. (Some policy documents would help us Gilmore) Labour and even socialism can work in the boom, but during a recession there must be austerity measures to ensure the future of Ireland, the Euro currency and fend of the dreaded IMF. I trust that the right-wing parties will do that, I don’t trust the left. However in a somewhat oxymoron, I also feel that the current right-wing government is not being fully honest with the people as to how cutting the next number of years will be and as to how no one is predicting an improvement in the scandalous unemployment scenario for some time. The real reality is that the pain is not over, the unemployment rates will remain among the highest in Europe for some time and all the time, in the background, is that possibility that our growth figures are a hope. A hope that may turn out to be very false, like the falsity that was the “soft landing” claim and previous to that the claim that the boom would last forever…and if our hopeful growth rates do turn out to be wrong or the global economy fails to grow by as much as we need to help stimulate exports and by extension GDP…can we cope? A tough budget is coming this year, next year and for the foreseeable future. Yet all the while, they may not be tough enough… The Government claims things are getting better. The Irish people will soon discover this to be another down right lie. For when another 3 billion is removed from the economy, it will dampen growth. (Our growth rates are already very frail and volatile.) But to quote the Fianna Fáil poster in 2007, “the best is yet to come” Somehow I feel that the 440,000 on the live register, along with the 80,000 who have emigrated may disagree fundamentally.
