[no politics.ie] Is Ireland the model for the European Crisis?

digitalninja · 02-01-2013 01:59PM #1

Since politics.ie won't let me post it there (need 100 posts of worthless spam first) I'm posting it here, can someone crosspost it for me?
Thanks.

http://www.lemonde.fr/international/article/2012/12/21/l-irlande-un-modele-pour-l-europe-en-crise_1809525_3210.html

Translation.

Ireland, a model for Europe in crisis?

After six years of crisis, Ireland is better. To believe the most optimistic country, which holds the rotating presidency of the European Union (EU) on 1 January 2013, a model that would even Brussels needs to prove that the euro area is a bright future . "After years of shameful, this presidency is an opportunity for Ireland to restore its pride," said Elaine Byrne, columnist for the Sunday Independent.

Ireland is she out of the crisis? From mid-2007 to late 2010, the gross domestic product (GDP) in Ireland has achieved a dramatic drop of 15%. But the past two years, the economy has stabilized. The year 2011 has been the return of growth, with an increase of 1.4% of GDP. And 2012, although duller must confirm the trend, with 0.9% expected. The recession is officially over. "We probably had the worst," said Alan McQuaid, economist at Merrion Stockbrokers in Dublin.
The former "Celtic Tiger", however, is far from new show teeth. This year, not only growth close to zero, but it is very irregular, with a return to negative territory in the second quarter. In addition, the stabilization phenomenon hides a two-tier exports up, but sluggish domestic economy.

On the positive side, the trade balance, which represents 20% of GDP, is in great shape. More than ever, Ireland rests its hopes on foreign multinationals that locate on its soil. Highlighting its tax rate on companies historically very low (12.5%), membership in the euro area and a well-qualified workforce, the country wants a rear base for European large enterprises. Thus multinationals dedicated to new technologies are installed in mass: Facebook, Twitter, Google and LinkedIn are especially present.

However, export growth slowed sharply in recent months. With the crisis in the rest of the euro area, it is not a surprise, but it is a worrying phenomenon for Ireland.

On the negative side, a domestic economy - 80% of GDP - as the recession continues. Unemployment, virtually nonexistent before the crisis, jumped to 14.6%. Consumption declines, year after year. The Irish are crushed by their private debts as a result of the housing bubble. Currently, 400,000 Irish - a population of 4.5 million - have a loan greater than the value of their property. At the same time, the Irish undergo austerity. Since 2008, the country voted eight budgets required! VAT was increased, new taxes were created, reduced welfare ... This fiscal tightening is impressive: from 2008 to 2015, it will reach 30 billion euros, or 20% of GDP. Problem: it stifles domestic recovery.

The country's finances are recovering them? Ireland has primarily been the victim of a real estate crisis. The bubble burst in 2007. Since then, property prices have been halved. This caused the near-collapse of all Irish banks that had lent so lax for a decade. If financial institutions were able to survive initially, they were overwhelmed by the global crisis that followed the collapse of U.S. investment bank Lehman Brothers in 2008. Panicking, the Irish government decided to vouch banks. So these are losses that the state supports. In total, the Irish aid to banks amounted to 55% of GDP! This has resulted in a deficit abysmal. This is why the bailout of 85 billion euros from the International Monetary Fund (IMF) and the European Commission was inevitable end of 2010.

Since then, the country progresses. Deficit, after reaching 32% of GDP at its peak due to bank bailouts, should be 8.2% this year. If it is huge, it is progress. Better still it's a good surprise, which exceeds the requirements of the IMF. Consequently, the return on the financial markets, planned for late 2013 by the aid plan is feasible. Dublin has a first toe in the ocean bonds this year, emitting - successfully - Treasury bonds in the short term. The country's bond rate fell from a peak of 14% to about 4.7%.

How did Ireland managed to get up? Ireland has followed to the letter doctrine orthodox economic, launching a "clash of competitiveness." The country has reduced its costs to raise. If multinationals come in numbers, it is because they are now interesting conditions. Besides the low corporate tax, real estate office is now much less than before the crisis. Employees themselves are tight belt: wages have stagnated at best, at worst decreased, often 10% to 15% depending on the sector.

The other key element of recovery is the banking consolidation. During the first two years of the crisis, banks have repeatedly revised upwards the extent of their losses. Falling real estate prices do not enrayant, they failed to stop their losses. The government has finally decided to enter the abscess, from there straight to the point: he nationalized the entire banking sector in March 2011!

More precisely, the top five institutions before the crisis, two were closed, and their bodies are controlled by the state, two were fully nationalized, the last (Bank of Ireland), the government is mounted at its capital. Now, the bleeding seems to have abated and institutions gradually reduce their losses.

Ireland is she a model? Europe in dream finally see a peripheral countries emerge victorious aid plan. It would be a way to prove that the austerity plans imposed across the continent work. "Germany would make us a model, but each country is unique," economist Alan McQuaid puts. If rigor has actually improved competitiveness Irish, two phenomena are a special case. The first is economic. Recovery by exports the model, followed by Ireland since the 1980s, which made the "Celtic Tiger". Focus on this area was relatively easy. Do the same thing in Greece or Portugal will be much more difficult.

The second problem is political. The Irish - relatively - readily agreed austerity. There has been almost no event and budget cuts could be made fairly easily. "The Irish have the feeling of being partially responsible for the crisis, says Elaine Byrne. Course, an alcoholic may blame the bartender served him having too much to drink, but in the end it is still he who drinks too much. We thought this was the same with mortgages. " Under these conditions, austerity is often seen in Ireland as a deserved punishment.

What were the political consequences of the crisis? The crisis has completely reshuffled the cards in the deck Irish politician. In the elections of February 2011, the Fianna Fail (center left), a party which has dominated Irish politics almost continuously for ninety years, was wiped out, losing 51 seats to 71. Since the country is led by Fine Gael (center right), in coalition with Labour. Almost two years after coming to power, the team remains relatively popular, under the leadership of its Prime Minister Enda Kenny.

However, the battle to become the main opposition party is in progress. Fianna Fail trying to rebuild. But face it, emerges Sinn Fein, the former political wing of the Irish Republican Army (IRA), which was only present for a long time in Northern Ireland. With his leftist rhetoric, it is the only party anti-austerity and collects 20% support in the polls.

Eric Albert - London, correspondence

hyperborean · 02-01-2013 02:04PM

digitalninja wrote: »

Since politics.ie won't let me post it there (need 100 posts of worthless spam first) I'm posting it here, can someone crosspost it for me?
Thanks.

http://www.lemonde.fr/international/article/2012/12/21/l-irlande-un-modele-pour-l-europe-en-crise_1809525_3210.html

Eric Albert - London, correspondence

Have you an opinion on this or are you eric Albert? personally I have seen better analysis of the situation right here in this forum.

Actually it looks exactly like it was written with boards in mind,

digitalninja · 02-01-2013 02:06PM

My opinion is that it leaves out so many facts that it's almost misinformation.
I was interested in what the views to the economist nerds were on this commentary.
And no I'm not a french journalist.

hyperborean · 02-01-2013 02:13PM

digitalninja wrote: »

My opinion is that it leaves out so many facts that it's almost misinformation.
I was interested in what the views to the economist nerds were on this commentary.
And no I'm not a french journalist.

What parts are missing and what parts are being used to miss inform me?

Im just curious, not having a go at you.

Scortho · 02-01-2013 02:55PM

digitalninja wrote: »

My opinion is that it leaves out so many facts that it's almost misinformation.
I was interested in what the views to the economist nerds were on this commentary.
And no I'm not a french journalist.

I thought it summed us up fairly well! We might be bad but were not down and out! There is light at the end of the tunnel, how long that tunnel is however depends on the worldwide economy.

maninasia · 03-01-2013 02:52PM

Ah the old worldwide economy props up it's head again. It was the worldwide economy that made us nationalise our banks and pay out so much in public salaries and welfare. Blah blah. What will sort Ireland out is the Irish not some mythical dependency on outside forces.

hmmm · 03-01-2013 06:21PM

It's a good article. We have had a massive increase in competitiveness thanks to falling wages which often goes un-noticed here, but international investors have very much noticed.

Sand · 03-01-2013 07:36PM

Seems to ask the question "Has Ireland recovered" and then merely *presumes* it has. Quite poor in that regard. As far as it discuss Ireland, the evidence it offers actually supports the alternative: that Ireland is not recovering. And that Ireland is very vulnerable to further international shocks - let alone the oncoming domestic difficulties with debt and the trade unions.

Also, I know foreign praise triggers a Pavlovian response in the Green Jersey brigade but try to remember one thing: the clowns in the civil service are right now trying to persuade the ECB/Eurozone to give them any measure of debt relief. Anything they can bring back as a great win because the government has placed so much of its credibility on "securing a deal on the promissory notes" so the civil service must be willing to offer anything and yet no deal after more than a year of trying.

Now, do articles saying "Ireland has recovered - all is well!" in the foreign press help or hinder the civil service? Are the ECB/Eurozone more or less likely to give us relief if they think were doing great and recovering already? Are you more likely to give a beggar some change if hes dressed in rags or in a nice suit?

Solair · 03-01-2013 08:00PM

I think the main thing that article shows is that Ireland's at least recoverable. However, I don't really think it's much to do with the austerity measures as the majority of our problem stems from a classic property bubble and associated tax losses / readjustment after it blew up in our faces.

We do actually have a lot of underlying industries that are still quietly working away and were the foundation of the actual celtic tiger in the 1990s / early 2000s.

The problem we have is how to deal with the mad debt levels that our idiotic banks ran up.

Spain and Portugal have elements of that, but they also had elements of their economies that were pretty much directly supported by lavish (borrowed) public expenditure. They're also hit by tourism downturns due to the general global recession / eurozone crisis which has really hit their poorer and more tourism-dependent regions very hard.

Spain's northern regions are probably quite comparable to Ireland in terms of their possibilities of recovery, so is the Madrid region. There are loads of businesses located there, both Spanish and multinational and quite a lot of exporting going on.

However, the poorer regions were booming on infrastructure building and property booms which feel apart once the rug was pulled.

Greece is another story entirely. Their whole economy seems to have been run on a giant credit card and almost everything seems to have come from public spending growth.

I think Greece also seems to have severe issues with corruption and general economic mismanagement which were glossed over due to the lavish amounts of cash available during the boom.

Spain, Portugal, Greece and to a large extent France and Italy also continue to have huge problems with labour market flexibility.

It was described quite well by someone before.

Europe basically has a few models of welfare state which cause different problems:

Model 1: Central European Model - France, Belgium, Germany, etc.
- High social spending, high taxation, strong labour protection laws and inflexibility.
It's not a bad model, IF you can pay for it. In a lot of countries it's becoming unsustainable as populations age.

Model 2: Nordic countries -
High social spending, high taxation, not very strong labour protection laws and quite a lot of flexibility. However, if you lose your job, you've a very strong safety net. This tends to encourage people to re-train and dip in and out of industries and move forward.

Model 3: Anglo-Irish UK/IRL.
Medium social spending, medium taxation, not very strong labour protection laws and quite a lot of flexibility. You can lose your job and be dumped on the scrap heap with a fairly mediocre level of protection. Encourages flexibility, but is not as progressive as the nordic model as you tend to not get the same levels of adult education / retraining. Ireland's probably slightly closer to the Nordic model on this than the UK is in many ways. It's certainly moved that way in the last couple of decades.
Can result in fairly big gaps between rich and poor.

Model 4: Southern European model:
Low social spending, low / medium taxation - VERY strong labour protection laws.
The result of this is that jobs are for life, people don't retrain and skill levels are generally not as high. The state tends to create jobs by directly intervening and recruiting public servants / state industry employees.
Tends to result in very big gaps between the rich and poor.

So, basically take your pick!

The consensus is that something between the Anglosaxon/Anglo-Irish and Nordic model is probably the best option.

maninasia · 04-01-2013 05:46AM

hmmm wrote: »

It's a good article. We have had a massive increase in competitiveness thanks to falling wages which often goes un-noticed here, but international investors have very much noticed.

Well where is the investment? There is also a decrease in demand due to vastly heightened emigration of people in the 20-40 year old age bracket.

Competitiveness is good, but taxes increasing every year certainly does not help to get investment or attract people to move to Ireland.

hmmm · 05-01-2013 11:23AM

maninasia wrote: »

Well where is the investment? There is also a decrease in demand due to vastly heightened emigration of people in the 20-40 year old age bracket.

Where is the investment? Our bond yields have collapsed, and every week brings new job announcements from foreign companies.

I agree on the tax thing, and the attitude from some that anyone earning over 100k is "rich" and should be taxed into the ground is also dangerous for inward investment.

Solair · 05-01-2013 01:00PM

hmmm wrote: »

Where is the investment? Our bond yields have collapsed, and every week brings new job announcements from foreign companies.

I agree on the tax thing, and the attitude from some that anyone earning over 100k is "rich" and should be taxed into the ground is also dangerous for inward investment.

It's dangerous for indigenous investment too : See what's happening in France in terms of flight of wealthy (although that's more extreme)

There's a balance between a progressive tax system that treats everyone fairly and crucify the wealthy.
Also, there's a difference between someone who's generated wealth by actually doing serious business vs someone who just speculated on property and borrowed it all or just gets vast senior end of the public sector / banking sector 'entitlements' that are grossly out of line with the value of their work.

The policies here have tended to reward speculators enormously with low tax on speculative incomes / capital gains etc and all sorts of encouragements to slash money into the property sector while taxing normal incomes generated from actual business quite heavily.
That absolutely has to change if we don't want a casino economy.

I know speaking to a few actual entrepreneurs, who are very aggrieved with the idea that they should be working their rears off to bail out bankers' or Sir Humphry's pensions. It's those people who, if you push them too far, will just pack up and leave feeling totally embittered.

There are two problems in the debate at the moment:

Speculators, bankers and overpaid protected professions are hiding behind entrepreneurs.

and senior public sector employees on huge salaries are hiding behind frontline workers on relatively moderate salaries.

Cutting Sir Humphry Appleby's salary or the cabinet's pension package should not equate to cutting some junior nurse's pay to a pittance or slashing the gardaí's equipment budget or whatever. There's little / no sense that they're prepared to cut the boss' / layers of management salaries before the front line staff. It's all looking like bottom-up stuff while some tokenism is going on at the top.

We are still not having rational debates about this stuff. There's a lot of "nasty rich people with all their money" and "damn public servants!" going on.

Ireland's problems were created by giving huge tax breaks to incentivise property investment, failing to regulate the banks and allowing the public service (especially at the top end) to bloat their incomes on the basis that there was some kind of bottomless pit of money (all of which was being borrowed indirectly through taxes on the property sector from the banks!)

I just think we need to be very careful that we don't take out anger out on genuine, entreprising business people who've made money out of actual business and innovation and also take it out on the whole public sector too. There's a very clear need to create a totally fair tax system without all these loopholes where everyone pays a reasonable, fair share.

There's also definitely still a need to tackle the excesses in certain aspects of the public sector (mostly at the top) and reign-in the now publicly supported / publicly owned banks too. It's not 2005 and we cannot justify those kinds of salaries and lavish pensions coming from the public purse. It should be benchmarked against some EU average or something, or the actual state of affairs in the private sector! Not, the peak boom private sector in 2004/5 and certainly never against bubble/bust industries like banking.

I'm still not at all convinced we're a good model of how to run a country. There are way too many vested interests protecting their patches and there's not enough being done to actually level the playing field.

maninasia · 05-01-2013 03:00PM

hmmm wrote: »

Where is the investment? Our bond yields have collapsed, and every week brings new job announcements from foreign companies.

I agree on the tax thing, and the attitude from some that anyone earning over 100k is "rich" and should be taxed into the ground is also dangerous for inward investment.

Job announcements and actual jobs are two different things. I'm not saying that there weren't investments, but we need to look at the actual hiring to see what is happening.

Solair · 05-01-2013 04:18PM

maninasia wrote: »

Job announcements and actual jobs are two different things. I'm not saying that there weren't investments, but we need to look at the actual hiring to see what is happening.

Yeah, I've noticed that, some announcements that are a tad hypothetical or that are conditional on something else before they rollout. Although, that being said there have been quite a lot of actual jobs created too.

Mr. teddywinkles · 06-01-2013 02:01PM

Solair wrote: »

It's dangerous for indigenous investment too : See what's happening in France in terms of flight of wealthy (although that's more extreme)

There's a balance between a progressive tax system that treats everyone fairly and crucify the wealthy.
Also, there's a difference between someone who's generated wealth by actually doing serious business vs someone who just speculated on property and borrowed it all or just gets vast senior end of the public sector / banking sector 'entitlements' that are grossly out of line with the value of their work.

The policies here have tended to reward speculators enormously with low tax on speculative incomes / capital gains etc and all sorts of encouragements to slash money into the property sector while taxing normal incomes generated from actual business quite heavily.
That absolutely has to change if we don't want a casino economy.

I know speaking to a few actual entrepreneurs, who are very aggrieved with the idea that they should be working their rears off to bail out bankers' or Sir Humphry's pensions. It's those people who, if you push them too far, will just pack up and leave feeling totally embittered.

There are two problems in the debate at the moment:

Speculators, bankers and overpaid protected professions are hiding behind entrepreneurs.

and senior public sector employees on huge salaries are hiding behind frontline workers on relatively moderate salaries.

Cutting Sir Humphry Appleby's salary or the cabinet's pension package should not equate to cutting some junior nurse's pay to a pittance or slashing the gardaí's equipment budget or whatever. There's little / no sense that they're prepared to cut the boss' / layers of management salaries before the front line staff. It's all looking like bottom-up stuff while some tokenism is going on at the top.

We are still not having rational debates about this stuff. There's a lot of "nasty rich people with all their money" and "damn public servants!" going on.

Ireland's problems were created by giving huge tax breaks to incentivise property investment, failing to regulate the banks and allowing the public service (especially at the top end) to bloat their incomes on the basis that there was some kind of bottomless pit of money (all of which was being borrowed indirectly through taxes on the property sector from the banks!)

I just think we need to be very careful that we don't take out anger out on genuine, entreprising business people who've made money out of actual business and innovation and also take it out on the whole public sector too. There's a very clear need to create a totally fair tax system without all these loopholes where everyone pays a reasonable, fair share.

There's also definitely still a need to tackle the excesses in certain aspects of the public sector (mostly at the top) and reign-in the now publicly supported / publicly owned banks too. It's not 2005 and we cannot justify those kinds of salaries and lavish pensions coming from the public purse. It should be benchmarked against some EU average or something, or the actual state of affairs in the private sector! Not, the peak boom private sector in 2004/5 and certainly never against bubble/bust industries like banking.

I'm still not at all convinced we're a good model of how to run a country. There are way too many vested interests protecting their patches and there's not enough being done to actually level the playing field.

Sums it all up really doesnt it

squod · 07-01-2013 10:26PM

Mr. teddywinkles wrote: »

Sums it all up really doesnt it

Article is completely misleading. I'd imagine you'd have trouble posting that anywhere, except maybe the RTE news website.

NAP123 · 07-01-2013 11:32PM

hmmm wrote: »

It's a good article. We have had a massive increase in competitiveness thanks to falling wages which often goes un-noticed here, but international investors have very much noticed.

Falling wages and increased taxes are a negative for an economy not a positive.

The slaveowners/ globalists might rejoice, but the real economy/us will eventually rise up and bite the slaveowners in the balls.

History repeats itself.

[no politics.ie] Is Ireland the model for the European Crisis?

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