Saturday 24 March 2018

Week 18: Greeks and house prices to take centre stage again

Former European Central Bank boss Jean-Claude Trichet is to appear at the Institute of International and European Affairs
Former European Central Bank boss Jean-Claude Trichet is to appear at the Institute of International and European Affairs
Colm Kelpie

Colm Kelpie

Two events are likely to dominate this week. The first occurs tomorrow, when Finance Minister Michael Noonan and Public Expenditure and Reform Minister Brendan Howlin delivers the Spring Statement in the Dáil.

Both ministers will make separate statements back-to-back in the Dáil from 2pm, similar to the routine on Budget day. However, neither minister will outline specific tax or spending measures.

Instead, it is expected they will focus broadly on policy direction, while outlining the constraints within which they must still operate.

It is expected that the statement will include revised economic forecasts that are thought to reflect the better-than-expected tax revenues.

It will coincide with the publication of the Stability Programme Update, which the Government must provide to the European Commission.

The second, arguably more exciting event this week, is the appearance before the Institute for International and European Affairs on Thursday of former European Central Bank president Jean-Claude Trichet.

The address will form part of the evidence given to the Oireachtas banking inquiry. Mr Trichet will give his account of events in 2008 and its aftermath to the inquiry not at Leinster House, where hearings have been going on since before Christmas, but in the margins of the public meeting.

Despite this departure from regular proceedings, the inquiry chairman Ciarán Lynch has insisted that the former ECB boss's evidence will be in order and legally admissible.

Mr Trichet was in charge of the Frankfurt-based ECB when the Irish Government guaranteed bank deposits in September 2008 and when Ireland was forced to take an EU-ECB-IMF bailout in November 2010.

But for a long time he said it would be a breach of protocol to come to Leinster House and testify at the inquiry and his engagement this week is a compromise.

Other economic events this week include the release of retail sales, residential property prices, and private sector credit data.

Residential property prices are due to be released tomorrow. In the 12 months to February, residential property prices (houses and apartments combined) at a national level rose by 14.9pc.

"There was an average official increase of 12.9pc in house prices in 2014, up from 1.8pc in 2013," according to Alan McQuaid, of Merrion Stockbrokers.

"Taking all the factors into consideration, an increase of 10pc is projected for 2015. As regards March, a monthly drop of 1pc is anticipated, which would give a year-on-year increase of 14.6pc."

On the international front, attention will remain on Greece. The Greek government needs to pay pensions and salaries to its civil servants and retirees over the coming days.

The country's deputy finance minister, Dimitris Mardas, has said there isn't enough cash in state coffers to meet these obligations, unless local authorities comply with a decree ordering them to transfer reserves to the Bank of Greece for short-term financing of the central government.

After a bad-tempered meeting of Eurozone finance ministers in Latvia last week, the European Central Bank is preparing to debate next week whether to make access to emergency cash for Greece's banks more difficult if aid talks remain deadlocked, just as the cash-strapped country will be faced with yet another debt payment.

While Prime Minister Alexis Tsipras's government struggles to pay pensions and salaries at the end of the month, Greece may get a brief respite in interest of about €201m on its International Monetary Fund loans due on Friday.

As the deadline coincides with a holiday, followed by a weekend, the payment can be delayed until May 6, it is understood.

The May 6 interest payment will be due on the same day that the ECB's Governing Council will meet to discuss whether to extend funds under its lifeline to Greek lenders.

Irish Independent

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