Friday 22 November 2019

Maeve Dineen: Wilbur Ross's miracle recovery isn't going to happen

WILBUR Ross is a good guy and he's talking up a storm right now as he touts Ireland as an ideal investment opportunity. This has had real and positive consequences -- while there are many reasons for the very welcome decline in Irish bond yields, one key reason is the frequent appearance of Ross in the US financial media recommending Ireland as a good place to invest.

Ross, who was one of the investors who bought a stake in Bank of Ireland this summer, was at it again last week, telling people that we will be the first European nation to recover from the sovereign debt crisis and will once again become the Celtic Tiger.

"What's not to like?" as our American cousins like to say.

Quite a lot. It simply isn't going to happen for starters. And most of us shouldn't want it to happen either. We've been described as a tiger and we are just about managing to pull ourselves out of the PIGS but a return to tiger status is not what we should be looking for. The next animal should be something more rugged and sustainable, like our world-renowned Irish Draught horse -- safe, steady and nimble with an ability to surprise.

There are many good reasons for subscribing to the belief that the worst is behind us. Apart from anything else, it is almost a mathematical impossibility that we could sustain another contraction on the scale of the recent squeeze but there are undoubtedly other, more positive reasons, to subscribe to the ESRI's analysis which says we will bump along the bottom for a few years yet.

The tax take is stable, unemployment is increasing at a much slower rate than previously and our frayed political relations with Europe are slowly mending.

All these factors, together with the remarkable performance of the domestic export sector, are grounds for hope -- but the road will be long and rocky and it's going to take a long time for any boost to feed into the real economy.

After all, the global economy remains fragile and the world's reserve currency looks set to be debased once again in order to allow the US to sidestep the reforms that we all know must come.

Political discipline in the eurozone is also breaking down. German Chancellor Angela Merkel is struggling to keep her parliamentary majority, French President Nicolas Sarkozy is struggling to retain the presidency and Italian Prime Minister Silvio Berlusconi is struggling to keep out of jail.

The August Purchasing Managers' Index -- a barometer of manufacturing activity -- from almost every corner of the globe showed a slowdown, which is a real cause for concern.

Our small, vulnerable economy may well have to endure another recession. Let's face it -- we just don't know. What we do know is that it is still much too early for anybody living in Ireland to start believing Wilbur Ross. This has always been a country that likes to listen to outsiders (or at least outsiders with an American accent) rather than listen to its own heart.

Let's not get too excited about this American accent and remember that Ross has a good incentive to talk up the economy right now -- he has bought a big stake in a well-capitalised bank for next to nothing.

It's not hard to see why he is happy with Ireland these days and how he stands to make a large amount of money if other people start believing the recovery story. That's capitalism.

Although if he keeps going on the way he does, people will start to think he is worried about what he has bought.

But the rest of us need to manage expectations for our own sakes and to ensure the country's long-term recovery. Shares in Bank of Ireland can be flipped for a quick profit. Ireland Inc is an entirely different matter.

Irish Independent

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