EU/IMF say 3% budget deficit by 2014 will damage economy: RTE News!

nordisk celt83

RTE 6.1 news reported that EU/IMF officials have stated that attaining a budget deficit of 3% by 2014 isn't feasible, and will damage the country's economic prospects and ability to repay its debts. (this is fg/ff policy)

The report suggested that EU/IMF favoured the Labour Party policy of extending the process of reducing the deficit out to a five year period...

No link, sorry!!!

andrewire

Here is your link:

There is a degree of private incredulity among European finance ministers over whether Ireland can achieve the austerity that has been imposed upon it – and whether it is right for the European Union to insist that the draconican plans remain unchanged.
To cut a budget deficit by some 8% of GDP in four years is a remarkable commitment, especially to do two fifths of the job in just one year – 2011. Behind closed doors, there is scepticism whether Ireland really can grow as its outgoing government forecasts while the economy takes this enormous hit, especially after more than two years of declining GDP. This is an experiment on a scale that no economy has suffered since the 1930s.
At the World Economic Forum in Davos this year, I ran into one leading EU finance minister who believed that the pace of deficit reduction simply had to be slowed – and that the EU had to demonstrate to the newly elected Irish government that it would be prepared to ease the pain. The minister had just come from a bilateral meeting with an EU counterpart in which they agreed that if the new Irish government wanted to create a plan B – a more measured plan for deficit reduction – their partner finance ministers in the EU should consider it urgently. This would be right for Ireland – and a demonstration to the Irish people that the EU was on their side. The euro's credibility depends not on a member state suffering decade-long stagnation, but on offering a safe haven – albeit with disciplines – for growth and stability.
Ireland has made some woeful economic mistakes. It allowed the boom to run out of control. Its financial and political leadership allowed the financial sector to loom far too large in its economy, often at considerable personal advantage. And when the crisis broke, Ireland was far too quick to excuse the professionals in the markets who had lent its banks the billions of euros necessary for their unjustified expansion. Instead, the Irish government and taxpayer have stood behind the banks, turning financial institutions' debts into the national debt. Without such action, Ireland's banks might have collapsed with untold effects on both Ireland and the world – but Ireland deserves something back from the international community now.
In Ireland, now in the midst of an election campaign, there is a remarkable willingness to accept the medicine as inevitable – an almost Catholic guilt for the excesses of the past. It is as though Ireland has to pay the most severe penance because its economic sins have been so great. In Ireland, only the Labour party seems to be making the case that some EU finance ministers in Davos made – that it is an imperative to deliver a feasible deficit reduction plan rather than one that is self-defeatingly harsh. On top of that, it has some intriguing and creative proposals to create institutions that would support Irish investment and innovation. Britain should watch the debate closely. Our plan for deficit reduction was not imposed by the EU, but is only fractionally less harsh. If the Irish Labour party has any influence on post-election Irish economic policy, Ireland's plans will change for the better – and another justification for our own extraordinary strategy will be removed.

Source: http://www.guardian.co.uk/commentisfree/2011/feb/18/ireland-austerity-measures-irish-labour-party

VOTE LABOUR!

nordisk celt83

Thanks for posting the link... It really is shocking to think of how Fine Gael will destroy the country if they're given free reign!!!

nordisk celt83

RTE 6.1 news reported that EU/IMF officials have stated that attaining a budget deficit of 3% by 2014 isn't feasible, and will damage the country's economic prospects and ability to repay its debts. (this is fg/ff policy)

The report suggested that EU/IMF favoured the Labour Party policy of extending the process of reducing the deficit out to a five year period...

No link to RTE coverage, sorry!!!

Have this interesting article though...

There is a degree of private incredulity among European finance ministers over whether Ireland can achieve the austerity that has been imposed upon it – and whether it is right for the European Union to insist that the draconican plans remain unchanged.
To cut a budget deficit by some 8% of GDP in four years is a remarkable commitment, especially to do two fifths of the job in just one year – 2011. Behind closed doors, there is scepticism whether Ireland really can grow as its outgoing government forecasts while the economy takes this enormous hit, especially after more than two years of declining GDP. This is an experiment on a scale that no economy has suffered since the 1930s.
At the World Economic Forum in Davos this year, I ran into one leading EU finance minister who believed that the pace of deficit reduction simply had to be slowed – and that the EU had to demonstrate to the newly elected Irish government that it would be prepared to ease the pain. The minister had just come from a bilateral meeting with an EU counterpart in which they agreed that if the new Irish government wanted to create a plan B – a more measured plan for deficit reduction – their partner finance ministers in the EU should consider it urgently. This would be right for Ireland – and a demonstration to the Irish people that the EU was on their side. The euro's credibility depends not on a member state suffering decade-long stagnation, but on offering a safe haven – albeit with disciplines – for growth and stability.
Ireland has made some woeful economic mistakes. It allowed the boom to run out of control. Its financial and political leadership allowed the financial sector to loom far too large in its economy, often at considerable personal advantage. And when the crisis broke, Ireland was far too quick to excuse the professionals in the markets who had lent its banks the billions of euros necessary for their unjustified expansion. Instead, the Irish government and taxpayer have stood behind the banks, turning financial institutions' debts into the national debt. Without such action, Ireland's banks might have collapsed with untold effects on both Ireland and the world – but Ireland deserves something back from the international community now.
In Ireland, now in the midst of an election campaign, there is a remarkable willingness to accept the medicine as inevitable – an almost Catholic guilt for the excesses of the past. It is as though Ireland has to pay the most severe penance because its economic sins have been so great. In Ireland, only the Labour party seems to be making the case that some EU finance ministers in Davos made – that it is an imperative to deliver a feasible deficit reduction plan rather than one that is self-defeatingly harsh. On top of that, it has some intriguing and creative proposals to create institutions that would support Irish investment and innovation. Britain should watch the debate closely. Our plan for deficit reduction was not imposed by the EU, but is only fractionally less harsh. If the Irish Labour party has any influence on post-election Irish economic policy, Ireland's plans will change for the better – and another justification for our own extraordinary strategy will be removed.

http://www.guardian.co.uk/commentisfree/2011/feb/18/ireland-austerity-measures-irish-labour-party

nordisk celt83

Here's a link to 6-1 news coverage!!!


http://www.rte.ie/player/#v=1092101

nesf

The IMF's issue is not necessarily the fiscal harshness but the underlying growth rate. Their projections mean that it's impossible to close the deficit before 2014 due to economic growth not being sufficient. Labour did not argue this, in fact their growth projections are as much out of line with the IMF ones as the rest of the parties.

Repainting it as Labour being right and the rest being wrong is disingenuous.

kippy

nordisk celt83 wrote: »

RTE 6.1 news reported that EU/IMF officials have stated that attaining a budget deficit of 3% by 2014 isn't feasible, and will damage the country's economic prospects and ability to repay its debts. (this is fg/ff policy)

The report suggested that EU/IMF favoured the Labour Party policy of extending the process of reducing the deficit out to a five year period...

No link, sorry!!!

Stall the digger a second or three.

I was under the impression that this 2014 deadline was PUT UPON us by the EU (I believe it is part of one of the treaties and we were since given some extra time to get our house in order)
It is this limit (set by the EU initially) that FF and FG have based their budgetary and fiscal policies on.
If labour WERE to get in and their policies carried out, I believe they would HAVE to get permission from the EU to extend the deadlines.


So, if the EU/IMF believe that this deadline of 2014 isnt a great idea then they SHOULD advise the government of the time that the deadline has been extended and to make the adjustments to their figures as required.

What I am seeing here is a report being twisted in such a way as to allege that the EU/IMF want a partly Labour government - which in now way reflects what this report is about.


(I amnt pro or anti any party, just pointing out a few things based on my understanding)

Killer Pigeon

Take that blueshirts! Your propaganda will not bring about a March on Dublin this time around.

nesf

Well, the Guardian is a left leaning paper, of course it's going to paint it favouring the Irish left.

Killer Pigeon

nesf wrote: »

Well, the Guardian is a left leaning paper, of course it's going to paint it favouring the Irish left.

*Awaits Daily Mail for right wing response*

Permabear

This post has been deleted.

ilovesleep

nordisk celt83 wrote: »

RTE 6.1 news reported that EU/IMF officials have stated that attaining a budget deficit of 3% by 2014 isn't feasible, and will damage the country's economic prospects and ability to repay its debts. (this is fg/ff policy)

The report suggested that EU/IMF favoured the Labour Party policy of extending the process of reducing the deficit out to a five year period...

No link, sorry!!!

How very thoughtful of them. How about reducing that crippling interest rate instead.

K-9

Much of a muchness between cutting it sharply by 2014 and the extra interest in delaying the cuts until 2016 IMO.

To me cutting earlier seems to be the middle ground between default or extending the pain over a longer period which could just prolong the recession even longer. The amount of cuts and extra taxes needed will mean taking money out of the economy, regardless of the term.

I don't agree with the cut, cut, cut brigade, but I think we may have no alternative in this case.

View

ilovesleep wrote: »

How very thoughtful of them. How about reducing that crippling interest rate instead.

If you don't like the rates they are charging, "the markets" will be happy to charge you a 50% premium on the rates you are complaining about (i.e. >9% V's <6%)...

Scofflaw

kippy wrote: »

Stall the digger a second or three.

I was under the impression that this 2014 deadline was PUT UPON us by the EU (I believe it is part of one of the treaties and we were since given some extra time to get our house in order)
It is this limit (set by the EU initially) that FF and FG have based their budgetary and fiscal policies on.
If labour WERE to get in and their policies carried out, I believe they would HAVE to get permission from the EU to extend the deadlines.


So, if the EU/IMF believe that this deadline of 2014 isnt a great idea then they SHOULD advise the government of the time that the deadline has been extended and to make the adjustments to their figures as required.

What I am seeing here is a report being twisted in such a way as to allege that the EU/IMF want a partly Labour government - which in now way reflects what this report is about.


(I amnt pro or anti any party, just pointing out a few things based on my understanding)

In fact, the 4-year deadline was set by Fianna Fáil as part of their 4-year programme, and that was the programme used in the EU/IMF negotiations. As far as I recall, the EU have never regarded the 4-year limit as possible, because their growth predictions for Ireland are far lower than those used by the government (I seem to recall drawing attention to this at the time). The 4 year target was set by our government, not by the EU.

cordially,
Scofflaw

MaceFace

Things are getting a bit toasty and although I didn't see the report, I hope they presented the issue correctly.

The EU/IMF have said that to get to 3% deficit may require 19-20bn in cuts in total.
They think that cuts of this amount over the next 3 years may kill the economy.

This is where this fictional 5bn black hole from FG comes from - they are only calling for 9bn in cuts (in addition to the recent 6bn).

So, FG are not proposing we cut another 14bn, just the 9bn.

Now the truth is literally not one person knows what is going to happen in 2013 or 2014 so it is all guess work. FG are guessing that the economy will grow more next year than Labour do and Labour think the economy will grow more in 2014 that FG do.
Either way - they all end up at the same point as both are working off the same figures.

The only difference between the two parties is Labour have publically said we can not reach that figure so lets not try.

So, ignore all the PR bull you hear and just look at the simple numbers of the thing.
Labour want to take 7bn out of the economy, FG want 9bn.
Labour want it done 50/50 between tax and cuts, FG favour 70% cuts (or there abouts).

I don't think Labour say what happens if they don't meet their targets - will they cut another few billion and still go with the 50/50 split?

For fans of The Wire - follow the money.

kippy

Scofflaw wrote: »

In fact, the 4-year deadline was set by Fianna Fáil as part of their 4-year programme, and that was the programme used in the EU/IMF negotiations. As far as I recall, the EU have never regarded the 4-year limit as possible, because their growth predictions for Ireland are far lower than those used by the government (I seem to recall drawing attention to this at the time). The 4 year target was set by our government, not by the EU.

cordially,
Scofflaw

The "four year programme" was set up by the government however the deadline of 2014 has been around long before that plan was set up. I believe it originated from some growth and stability pact.
Here we go:
http://www.finfacts.ie/irishfinancenews/article_1018423.shtml

The four year plan just fits into that deadline it was set at four years as the end year happened to be four years away from the start but that end year had been defined by the EU.

If anyone wants to extend this deadline it should be the EU.......one would think, and if the EU/IMF are saying this four year plan is overly optimistic perhaps they should extend the deadline to alloy whomever is in government to change a few things.

Personally, I think the growth rates in ANY parties manifesto are overly optimistic. I would have liked to have seen the irish "adjustment" take place in the initial 3 years of the issues starting (we'd be almost finished cutting now - less uncertainty etc)

tails_naf

MaceFace wrote: »

Things are getting a bit toasty and although I didn't see the report, I hope they presented the issue correctly.

The EU/IMF have said that to get to 3% deficit may require 19-20bn in cuts in total.
They think that cuts of this amount over the next 3 years may kill the economy.

This is where this fictional 5bn black hole from FG comes from - they are only calling for 9bn in cuts (in addition to the recent 6bn).

So, FG are not proposing we cut another 14bn, just the 9bn.

Now the truth is literally not one person knows what is going to happen in 2013 or 2014 so it is all guess work. FG are guessing that the economy will grow more next year than Labour do and Labour think the economy will grow more in 2014 that FG do.
Either way - they all end up at the same point as both are working off the same figures.

The only difference between the two parties is Labour have publically said we can not reach that figure so lets not try.

So, ignore all the PR bull you hear and just look at the simple numbers of the thing.
Labour want to take 7bn out of the economy, FG want 9bn.
Labour want it done 50/50 between tax and cuts, FG favour 70% cuts (or there abouts).

I don't think Labour say what happens if they don't meet their targets - will they cut another few billion and still go with the 50/50 split?

For fans of The Wire - follow the money.

This idea of 'taking money out of the economy' always gets me.
They say cutting PS wages/jobs takes money out of the economy and will hurt us.
I think this is wrong, as paying money out we don't have will surely hurt us more?
If not cutting is better than cutting, then why not 'borrow our way out of trouble?' i.e. go the opposite way and put money into the economy, and ohh lets sink ourselves to the tune of 30bn deficit? Yep that will fix it!!

We need to cut. It would be good if the govt cut duties in certain areas to stimulate business too.
i.e.
- if you cut local govt wages, you can cut rates on businesses.
- cut duty on commercial fuel (trucks/vans/etc)
- force a reduction in electricity rates by 10% (30% for businesses)
- setup govt lending scheme to small businesses (to bypass banks who are not lending)
- cut vat on certain items - irish made products, perhaps, for a year to encourage buying irish? govt will make the taxes back through profits and wages of those employed in the irish companies producing these products.

A few small cuts like that will bring prices down, and bring back a bit of the growth we need.

gandalf

I think what this story proves is that Labour and Fine Gael are right, the deal can be renegotiated which flies in the face with what Fianna Fail are saying.

ei.sdraob

I was accused yesterday in the comments of being biased against Fine Gael and for Labour. However, today I’m going to have to wave the yellow card at Labour for their role in the ongoing rumble about fiscal plans, specifically the supposed €5 billion “black hole” (e.g. here and here) in Fine Gael’s budgetary plans.

The issue relates to the following statement on page 29 of European Commission’s report on Ireland:

If the consolidation to reduce the deficit to 3% of GDP needed to be achieved by 2014, this would risk choking the recovery and further weakening the banking sector, possibly resulting in additional budgetary costs. The necessary additional budgetary effort in 2011-14 would amount to around €4 ½ to €5 bn, according to the Commission services forecast.

Fine Gael’s plans use what they call “the Department of Finance’s forecasts”, which presumably means the growth projections in the four-year plan (though it would be nice if they said that and produced a table being explicit about how their growth assumptions and other spending and tax promises translate into deficit ratios.) Based on this, they project reaching a deficit of 2.8% in 2014, just like the Four Year Plan.

Since FG are promising to deliver a deficit below 3% in 2014, does the Commission’s statement mean there is a €5 billion “black hole” in FG’s plans? Well, no. The additional adjustments that the Commission believe would be necessary to reach the 3% target stem from the Commission’s lower forecasts for the growth rate of nominal GDP. The Commission projects an average growth rate of 3.1% for nominal GDP over 2011-2014, compared with 3.9% in the Four Year Plan (and 3.85% in Labour’s projections.)

This means lower GDP and higher deficits in 2014 than are projected by the government and FG. However, FG are explicit that they will not introduce additional cuts to meet the 3% target in 2014:

We will review the pace and timeframe of the fiscal adjustment with the EU and IMF on an annual basis to take into account developments in the real economy. Should growth rates disappoint, we will continue with the same level of fiscal adjustment, but will avail of the extra year to reduce the deficit to under 3% of GDP offered by the EU-IMF Programme of Support.

Of course, it’s questionable whether the 3% target can be achieved by 2015 either and the IMF, freed from the strictures of having to pretend the Stability and Growth Pact matters, forecast that it won’t be.

Anyway, the black hole business is unfair to FG and the truth is that the differences between the overall stance of fiscal policy being proposed by FG and Labour are fairly small. FG planning to implement €9 billion in adjustments over the next three years, while Labour are planning to implement €7 billion. One can debate whether a slightly slower pace of adjustment is a better idea but the fact remains that policy will be severely contractionary whichever party gets its way.

When looking for black holes in the Fine Gael plan, one would be better off focusing on whether the promised efficiency improvements can really generate the predicting savings on the spending side.

related article

CDfm

kippy wrote: »

What I am seeing here is a report being twisted in such a way as to allege that the EU/IMF want a partly Labour government - which in now way reflects what this report is about.


(I amnt pro or anti any party, just pointing out a few things based on my understanding)

A very grounded argument kippy +1

Permabear

This post has been deleted.

CDfm

Permabear wrote: »

This post had been deleted.

And Labour seem to be the Sultans of Spin.

Rubik.

Permabear wrote: »

This post had been deleted.

And you are being just as partisan by referring to the "floundering" Labour party. Even FG's own poll, which you would assume would err on the side of optimism, has them on 72 seats - still well short of an overall majority. Labour will be part of the next Government and they will be a much more equal coalition partner then ever before, with much more of a say on what goes into the programme for Government. The notion of a floundering party is more wishful thinking on your part than anything else.

kippy

Rubik. wrote: »

And you are being just as partisan by referring to the "floundering" Labour party. Even FG's own poll, which you would assume would err on the side of optimism, has them on 72 seats - still well short of an overall majority. Labour will be part of the next Government and they will be a much more equal coalition partner then ever before, with much more of a say on what goes into the programme for Government. The notion of a floundering party is more wishful thinking on your part than anything else.

Not to derail the thread - but the labour party are in trouble (in the polls at least - its not just a "notion") And the timing and spin of this report are highly suspicious.
The reality as I see it, if FG get anywhere over 70 seats there will be enough like minded Independents for FG to delve into a pick a few that will make a majority.

Apologies for taking thread even further OT.

evercloserunion

ilovesleep wrote: »

How very thoughtful of them. How about reducing that crippling interest rate instead.

Or sending us back to the bond markets where we have to borrow at a much higher rate...

evercloserunion

Permabear wrote: »

This post had been deleted.

Of course the IMF isn't going to come out and support the Labour party in its electoral endeavours. It doesn't take a right or left wing stance either. But it's interesting to note that the left promote A, the right promote B, and the IMF has come out and said that B would damage our prospects of economic recovery. It's the very fact that the IMF is an apolitical organisation that makes it interesting. It means you can't dimsiss them like you dismiss the Guardian without even addressing its points.

Rubik.

kippy wrote: »

Not to derail the thread - but the labour party are in trouble (in the polls at least - its not just a "notion") And the timing and spin of this report are highly suspicious.
The reality as I see it, if FG get anywhere over 70 seats there will be enough like minded Independents for FG to delve into a pick a few that will make a majority.

Apologies for taking thread even further OT.

Who are these 13, or so, like minded independents?

nesf

gandalf wrote: »

I think what this story proves is that Labour and Fine Gael are right, the deal can be renegotiated which flies in the face with what Fianna Fail are saying.

FF have been very careful to say the deal can't be unilaterally renegotiated which was what Labour etc were going on with "Frankfurt's way and Gilmore's way" crap earlier in the campaign. Any renegotiation will happen as part of a pan-European agreement which is what FF have said. Standard semantics and rhetoric clash stuff.

kippy

Rubik. wrote: »

Who are these 13, or so, like minded independents?

At the minute I havent a clue as I amnt familiar with all 200+ or so independants running and their chances of winning a seat however I suspect FG wont need 13 of them and its likely that they'll get them without too much trouble - a lot less trouble than forming an alliance with Labour.

dlofnep

Sinn Féin stated this from the beginning - the 4 year plan was too harsh, and unfeasible.

kippy

dlofnep wrote: »

Sinn Féin stated this from the beginning - the 4 year plan was too harsh, and unfeasible.

Fair play to them,
As I mentioned it is four years as that is the time limit that was imposed by the EU.

I dont think it is too harsh, I think it is too dragged out to be honest and hits the wrong areas.

nesf

dlofnep wrote: »

Sinn Féin stated this from the beginning - the 4 year plan was too harsh, and unfeasible.

I don't know how many times I have to repeat this but the IMF/EU are not saying that. They are saying the underlying growth rate prevents a return to a 3% budget deficit by 2014. That is extremely different to agreeing with either the SF or Labour position on the issue.

That and SF and Labour definitely did not argue for a lower growth rate making 2014 not a possibility.

dlofnep

nesf wrote: »

I don't know how many times I have to repeat this but the IMF/EU are not saying that. They are saying the underlying growth rate prevents a return to a 3% budget deficit by 2014. That is extremely different to agreeing with either the SF or Labour position on the issue.

That and SF and Labour definitely did not argue for a lower growth rate making 2014 not a possibility.

Sinn Féin stated that there cannot be growth without stimulus, and without ensuring the general public has enough disposable income to ensure business operates as normal, especially for small to medium sized local enterprises which are strictly dependant on the local economy.

If you inflict too much burden on the public, they will not spend, nor will they be able to spend.

kippy

dlofnep wrote: »

Sinn Féin stated that there cannot be growth without stimulus, and without ensuring the general public has enough disposable income to ensure business operates as normal, especially for small to medium sized local enterprises which are strictly dependant on the local economy.

If you inflict too much burden on the public, they will not spend, nor will they be able to spend.

Indeed, however the issue is also "confidence" related.
A shortish ultra sharp adjustment is far better than one which is drawn out over a number of very uncertain years in my opinion.
There is no reason that you cannot reduce the costs/charges/overheads for businesses at the same time to try offset some of that however that hasnt happened either.

What you have here is a really strange news report which causes a lot of confusion and is rife for spinning.

nesf

dlofnep wrote: »

Sinn Féin stated that there cannot be growth without stimulus, and without ensuring the general public has enough disposable income to ensure business operates as normal, especially for small to medium sized local enterprises which are strictly dependant on the local economy.

If you inflict too much burden on the public, they will not spend, nor will they be able to spend.

They did not produce estimates of growth with which they base their economic policy of, which is at question here. It's also not as simple as Sinn Fein suggest because each year you delay the adjustment the greater the burden becomes over the medium term which has a deflationary effect and inhibits growth. It's not as simple as "delay adjustment = more growth."

dlofnep

No, it clearly isn't as simple as that, nor was I attempting to portray it is such. And I do agree that the consumer needs confidence in order to assist growth. However - the impact of a 4 year deficit reduction would/will certainly impact on confidence and on growth. It is certainly a valid stance to state that such a rapid reduction in deficit will cause noticable harm to the state's growth. Sinn Féin argued this point and were told that a 4 year plan was the only feasible option. At least give credit where credit is due.

nesf

dlofnep wrote: »

No, it clearly isn't as simple as that, nor was I attempting to portray it is such. And I do agree that the consumer needs confidence in order to assist growth. However - the impact of a 4 year deficit reduction would/will certainly impact on confidence and on growth. It is certainly a valid stance to state that such a rapid reduction in deficit will cause noticable harm to the state's growth. Sinn Féin argued this point and were told that a 4 year plan was the only feasible option. At least give credit where credit is due.

No one argues that a 4 year reduction will not negatively impact confidence and growth. The thing is any correction will negatively impact confidence and growth as will not correcting the deficit. The issue with Sinn Fein's (and Labour's) argument is that fail to tell people that delaying the adjustment will do damage to the economy. Also they fail to tell people that each year we delay increases the interest burden for the next 20 years on the economy.

kippy

dlofnep wrote: »

Sinn Féin argued this point and were told that a 4 year plan was the only feasible option. At least give credit where credit is due.

Sinn Fein were told this mainly because a four year plan WAS the only option.
The link I posted above highlights how the EU set a timeline on bringing our deficit within EU set limits (based on treaties we have signed up to).
This timeline has been the driver to the FF and indeed the FG "four year plans".
If the EU had said the timeline can be stretched out (to 2016 for example) then these plans COULD be amended.

If the EU doesnt think we can make their deadline because of what they know now (ie growth is not as strong as was thought) then they should advise that this deadline can be extended.
I dont however think we should be pushing this out any further.

We've had 3 years so far and another 3 years (at least) of death by thousands of cuts - absolute torture and a killer on the economy, No one wants to spend ANYTHING cos they dont know what will happen next with the banks, the IMF, different government based policies etc.

Again, if we had three years of massive cuts we've have it done and dusted at this stage - no doubt the IMF would have been in earlier but we'd have sorted out many of the problems that are still on the plate for the next 3 years.

K-9

dlofnep wrote: »

No, it clearly isn't as simple as that, nor was I attempting to portray it is such. And I do agree that the consumer needs confidence in order to assist growth. However - the impact of a 4 year deficit reduction would/will certainly impact on confidence and on growth. It is certainly a valid stance to state that such a rapid reduction in deficit will cause noticable harm to the state's growth. Sinn Féin argued this point and were told that a 4 year plan was the only feasible option. At least give credit where credit is due.

I'm very aware of the damage the 4 year plan can do. Things is, a 6 year plan will do the same damage, just over a longer time frame.

Bullseye1

Permabear wrote: »

This post had been deleted.

Doh! That is brilliant. Propaganda at work. Some of the labor supporters are away with the cuckoos.

dlofnep

K-9 wrote: »

I'm very aware of the damage the 4 year plan can do. Things is, a 6 year plan will do the same damage, just over a longer time frame.

I'm referring to the impact it will have from a social standpoint.

Wilser1

nordisk celt83 wrote: »

Thanks for posting the link... It really is shocking to think of how Fine Gael will destroy the country if they're given free reign!!!

Think of the 5 Davenport Hotel workers who have had their minimum wage cut by €1 by the owner Noel O'Callaghan of O'Callaghan Hotels. This is a disgraceful and immoral action. Mr O'Callaghan gives financial assistance to both Fine Gael and Fianna Fáil.

The blueshirts and their pals on the right of Irish politics will only destroy the lives of working people in Ireland, not the priveliged, shareholding, tax avoiding minority who have controlled this country since its foundation.

kippy

Rubik. wrote: »

Who are these 13, or so, like minded independents?

There was an article in the Sindo today outlining the fact that certain independent candidates had already been approached informally by FG to gauge the lay of the land..

K-9

dlofnep wrote: »

I'm referring to the impact it will have from a social standpoint.

So am I.

At this stage I think we've prevaricated enough about the situation, introduced 3 budgets or maybe 4 budgets in total and the figures haven't changed that much.

I can see the argument for stretching it out but that will mean near 10 years of tinkering with the budget and as growth figures have shown, it is doing damage to GNP in particular. At this stage, people know the extra cuts and taxes are coming, regardless of political beliefs, whether people advocate default, renegotiation or whatever.

I don't see the value in the public worrying for the next 6 years about what will be next in the budget. Get it over and done with as quickly as possible. Once people know that the worst is over, confidence will return. Economics is largely about confidence after all!

Basically, whether we go 4 or 6 years, the social and economic cost is going to be huge.

Rubik.

kippy wrote: »

There was an article in the Sindo today outlining the fact that certain independent candidates had already been approached informally by FG to gauge the lay of the land..

Yeah, I saw that. In hindsight I should have waited for the the 2 polls that were going to be out later in the day before making such a bold prediction. Still think it will a FG/lab government though, but it will be close.

CDfm

nesf wrote: »

They did not produce estimates of growth with which they base their economic policy of, which is at question here. It's also not as simple as Sinn Fein suggest because each year you delay the adjustment the greater the burden becomes over the medium term which has a deflationary effect and inhibits growth. It's not as simple as "delay adjustment = more growth."

nesf wrote: »

No one argues that a 4 year reduction will not negatively impact confidence and growth. The thing is any correction will negatively impact confidence and growth as will not correcting the deficit. The issue with Sinn Fein's (and Labour's) argument is that fail to tell people that delaying the adjustment will do damage to the economy. Also they fail to tell people that each year we delay increases the interest burden for the next 20 years on the economy.

+ 1 SPOT ON

Sabotaging the implementation of the Croke Park agreement really has hurt us a lot more than people in the unions or Labour care to admit or fess up to.

In fact, money spent on dole payments goes straight into the economy because it is consumed and has an effect locally evenly spread.

Money spent on public services wages does not give you that effect.

Now I don't agree with lots in our welfare system such as the lone parents allowance etc.

The other issue of course that is costing FF is its attack on Public Sector Wages which are amongst the highest in Europe and 49% higher than the private sector.

You can talk deficit reduction all you like but borrowing money to pay public service wages is well

https://www.youtube.com/watch?v=7PzL0bIdFYg

pure Horlicks :pac:

K-9

CDfm wrote: »

+ 1 SPOT ON

Sabotaging the implementation of the Croke Park agreement really has hurt us a lot more than people in the unions or Labour care to admit or fess up to.

In fact, money spent on dole payments goes straight into the economy because it is consumed and has an effect locally evenly spread.

Money spent on public services wages does not give you that effect.

Now I don't agree with lots in our welfare system such as the lone parents allowance etc.

The other issue of course that is costing FF is its attack on Public Sector Wages which are amongst the highest in Europe and 49% higher than the private sector.

You can talk deficit reduction all you like but borrowing money to pay public service wages is well

https://www.youtube.com/watch?v=7PzL0bIdFYg

pure Horlicks :pac:

The problem with cutting PS pay is you also reduce your tax revenue on the other side. This happened with the pension levy.

So if you cut PS pay, you'll have to increase taxes on the other side, hence levies and the Universal Social charge.

Take somebody on 50k in the PS. Cut their pay by 10% and they are probably paying 41% tax, 4% PRSI, 7% Social levy, Pension levy of about 8% and the old pension charge of about 5%.

So, out of the 5k cut, you might be only saving 1.5k. That money may well be spent in the local economy, just like Welfare.

If you go the redundancy approach you have extra capital expenditure as well or they maybe entitled to welfare payments.

We still need to cut the expenditure side but it isn't the quick fix many think it will be. Tax and growth will be affected. I think the stats are, for every 1% of Government spending you cut, growth drops by 0.5%. It's why we are so dependent on exports.

CDfm

I appreciate that but tax & prsi from public sector pay is notional as no money actually changes hands

where it is real is that it caused real wage inflation and acted as a catalyst and affected the whole economy

it is a bit like benchmarking and you should be able to benchmark downwards

ireland became a high wage economy.

the other factor of public service pay is that they include increments based on lenght of service -so they keep going up up up .

these could be frozen to correct the anomaly

so how can a wage freeze be a wage freeze if the wages still go up.

Its a fallacy.

K-9

CDfm wrote: »

I appreciate that but tax & prsi from public sector pay is notional as no money actually changes hands

where it is real is that it caused real wage inflation and acted as a catalyst and affected the whole economy

it is a bit like benchmarking and you should be able to benchmark downwards

ireland became a high wage economy.

the other factor of public service pay is that they include increments based on lenght of service -so they keep going up up up .

these could be frozen to correct the anomaly

so how can a wage freeze be a wage freeze if the wages still go up.

Its a fallacy.

Are you seriously saying that when a public servant gets paid, no money changes hands? They don't pay tax, PRSI, levies and pension deductions? That these aren't included in Government estimates of tax revenues?

I know about benchmarking, competitiveness etc. but we have a €18 Billion PS pay bill, about 40% of Govt. expenditure. We get a substantial part of that back in direct tax revenue from the individual plus money spent in the economy that brings in VAT receipts and taxes on profits from businesses.

Again, as I said earlier, I prefer the 4 year approach as I think it is better to get these cuts and tax rises over as quickly as possible, but I'm under no illusions that cutting the PS pay and Welfare bill isn't going to restrict growth or damage the economy.

Saying it is notional makes it appear you don't understand what Government expenditure adds to an economy.

Scofflaw

K-9 wrote: »

Are you seriously saying that when a public servant gets paid, no money changes hands? They don't pay tax, PRSI, levies and pension deductions? That these aren't included in Government estimates of tax revenues?

I know about benchmarking, competitiveness etc. but we have a €18 Billion PS pay bill, about 40% of Govt. expenditure. We get a substantial part of that back in direct tax revenue from the individual plus money spent in the economy that brings in VAT receipts and taxes on profits from businesses.

Again, as I said earlier, I prefer the 4 year approach as I think it is better to get these cuts and tax rises over as quickly as possible, but I'm under no illusions that cutting the PS pay and Welfare bill isn't going to restrict growth or damage the economy.

Saying it is notional makes it appear you don't understand what Government expenditure adds to an economy.

Government expenditure undoubtedly do add to the economy - in many different ways - but if you're going to consider the public sector payroll as €18bn, and the tax take including the tax from the PS payroll as €34bn, it should be obvious even on a Sinn Fein calculator that reducing the PS payroll, while it will reduce the tax take, will reduce the PS payroll bill by more than it reduces the tax take:

1. €18bn PS payroll - taxes €4.5 - total tax take €34bn - gap - €16bn for all other expenditure

2. €15bn PS payroll - taxes €3.75 - total tax take €33.25 - gap - €18.25 for all other expenditure

So a €3bn reduction in the PS payroll only loses €0.75bn in tax take.

cordially,
Scofflaw