Category Archives: Ireland

The IMF yesterday published its 8th of 12 quarterly reviews of Ireland’s bailout program. This is what they had to say:

1. We continue to meet our headline targets.
2. Regaining sustained access to sovereign bond markets, and successful graduation from the bailout, requires an EU deal on Ireland’s bank debt burden.
3. Net exports are the key growth driver, but their rate of increase has slowed. Overall, growth appears to be slowing in Q4 2012.
4. Domestic demand will contract in 2013 before returning to growth in 2014 as private consumption becomes a net positive. Government austerity means ‘fiscal drag’ will continue until at least 2015.
5. Real GDP growth would reach almost 4% by 2015 if it were not for government tax hikes and spending cuts. Continue reading →

Six months ago, I highlighted the increasing tendency of Irish banks, many of which are owned in whole or in part by the state, to hold on their books significant amounts of Irish government debt. Far from the ‘vicious circle’ between banks and sovereigns being broken, it is growing stronger than ever.

I noted then that in the 9 months to March 2012, Irish banks’ holdings of our national debt had increased by 40%, or more than  EUR 4bn, during which time the benchmark yield on Ireland’s sovereign debt fell from 14% to 6%.

In the intervening 6 months, the banks’ holdings have increased by a further  EUR 4.2bn (of which  EUR 3.1bn is accounted for by the financial chicanery that saw Bank of Ireland effectively lend money to the government so that they didn’t have to borrow it elsewhere) to  EUR 18.9bn, more than 10% of the total outstanding.

Irish Banks’ Holdings of Irish Sovereign Debt (EUR millions):

Source: Irish Central Bank Monthly Statistics, October 2012 and ntma.ie

Continue reading →

On the second working day of every month, the Department of Finance publishes the exchequer returns – a summary of the income, expenditure and deficit position of the country in the year to date. At the end or each quarter – so April, July, October and January – they publish the figures with the fanfare of a press conference. Yesterday, they published returns for the first nine months of this year.

So, what do the figures tell us?

1. Tax revenues are up on the back of tax hikes in last two budgets. Of all the major tax headings, corporation tax increased the most in percentage terms, from EUR 2.1bn to EUR 2.5bn, while income tax receipts increased the most in cash terms, from EUR 9.3 to EUR 10.4bn. Continue reading →

From its peak at the back end of 2007, the Irish economy sank like a stone for two solid years, seasonally-adjusted quarterly GDP falling 10.7% in real terms. Ever since, it has seemed alternately to be sinking more slowly or rising gradually. In reality, for two and a half years it has been treading water beneath the surface.

Between the first three months and the second three months of 2012, estimated GDP was within a rounding error of zero growth, avoiding a technical recession – two quarters of successive GDP contraction – by less than one euro for every person in the country. In the 10 quarters since end 2009, GDP has increased just 2.6%, barely keeping pace with population growth. The unemployment rate remains stranded at 14.8%.

The domestic economy is starved of the oxygen it needs to grow: consumers are overburdened with debt; businesses are either afraid to invest because of weak demand or unable to invest due to lack of credit; government is reinforcing the problem through ongoing, enforced austerity.  The one bright light is Ireland’s continuing strong export performance, even in the face of a challenging external environment. Continue reading →