Commission report criticises Government for 'slow progress' on key reforms

Scofflaw

The European Commission's Spring report on our adjustment programme is somewhat mixed:

An unpublished bailout report by the European Commission has attacked the Government's slow progress on key reforms.

The strongly worded document is critical of slow or delayed changes to legal services, the introduction of credit register and steps to cut the cost of drugs.

It also says the Government will miss an important target in opening "one-stop-shop" facilities to help the unemployed.

http://www.rte.ie/news//news/business/2013/0617/457145-commission-lashes-slow-progress-on-key-reforms/

The unpublished report in question is here: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SWD:2013:0212:FIN:EN:PDF

The good:

Ireland has come a long way towards addressing the external and internal macroeconomic imbalances accumulated prior to the crisis.

The economic recovery is continuing at a moderate but steady pace. Output is growing above the euro area average and employment has started rising.

Market confidence in Ireland's prospects continues to improve, with yields on medium-term bonds back to pre-crisis levels.

The mixed:

Against this backdrop, the authorities' compliance with programme conditionality remains generally strong. Progress on some structural reforms initiated earlier in the programme (e.g., the introduction of household water charges, the reform of the legal services, and the establishment of a central credit register) has been slower than expected.

Fiscal consolidation objectives have so far been achieved, but the deficit remains high.

And the critical:

Important challenges remain also in other policy areas, requiring continued determined action. These include the high unemployment rate and its worryingly large long-term component, the large and still growing (albeit at declining pace) bank arrears, the large debt overhang on both households and corporates (especially SMEs), and banks' weak profitability.

With the appropriate input from the national supervisor and regulator, banks need to step up their efforts to address troubled loans.

Addressing structural issues in the labour market remains a priority.

Other reforms are also continuing, though in some cases delays are accumulating.

I'd have to agree that the progress on reforming the legal profession has been pretty much non-existent, and I suspect the government of delaying reforms, hoping to be out of the programme before they really have to be implemented.

A case of "much done, much still to do", really...

cordially,
Scofflaw

Scofflaw

Some of the specifics:

The process of reforming legal services has been unduly and frequently delayed and needs to come to fruition rapidly. The Minister for Justice, Equality and Defence indicated that amendments to the Legal Services Regulation Bill would be completed soon and made publicly available before the Bill would be considered at Committee Stage from 10–12 July. Legal services reforms constitute a key component of the overall strategy to facilitate regaining competitiveness by realigning domestic costs to costs in other jurisdictions. Until this reform is completed, legal services costs will remain excessively high, having for the most part failed to adjust during the crisis, unlike other sectors of the economy. Such high costs affect the competitiveness of the Irish economy as a whole (Box 4).

Box 4: The high cost of legal services continues to cause problems

Structural reforms are essential for boosting growth, increasing competitiveness and enhancing the prospects for job creation, but often involve confronting vested interests. While overall the Irish economy has adjusted well since the onset of the crisis, the pace and scale of price adjustment in the non-traded sector has been uneven. This may be due in part to structural factors such as barriers to competition.

In particular, the cost of legal services has not fallen significantly from pre-crisis levels. This is in contrast to other professional services for which the underlying cost dynamics should be comparable, for example accountancy services. Here, prices have adjusted more in line with developments in the economy as a whole Studies show inefficiency in the legal system impacts on the economy. High legal costs feed through to higher prices for goods and services, and therefore have important implications for competitiveness. This has repeatedly been cited by the Irish Small and Medium Enterprises Association (ISME), as a constraint on Irish businesses.43 In particular, costs may act as a barrier to small companies seeking redress for contract enforcement. Figure 18 shows that as a percentage of the claim, attorney fees in Ireland are among the highest in the EU-27.

Since 2006, a number of significant barriers to competition in the supply of legal services in Ireland have been identified44, including in areas such as advertising, training and the formation of joint practices. In line with programme commitments, the Authorities introduced a new Legal Services Regulatory Bill in late 2011 to address many of these concerns. However, the Bill as initiated encountered vocal criticism from the legal professions and did not advanced despite repeated commitments by the Authorities to the contrary. After 19 months, the draft bill has yet to be enacted. Amendments to address concerns around the independence from the executive of the new regulatory authority have not yet been made available. As such an assessment of their potential impact on competition is not possible.

Given this lack of progress, and considering that other avenues of competitiveness improvements (such as wage containment) seem to be approaching their limit, addressing high legal costs has now become an important policy challenge, including through the timely completion of the remaining legislative and executive steps to ensure the new Legal Services Regulatory Authority is operational without any further delay.

Unimpressive.

cordially,
Scofflaw