Wednesday 15 August 2018

Colm McCarthy

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Leo Varadkar makes a coherent case for Europe but this love affair could prove ephemeral for Ireland. Stock picture

It's fun to love Europe right now, but foolish to trust too much 

Writing in these pages before Christmas, Leo Varadkar expressed the view that Ireland's natural home was in the European Union. He wrote: "Over the past few weeks the support we received from the EU negotiators and fellow Heads of State and Government was invaluable and was the clearest possible illustration of the values of the European Union, and why small countries are better off in a big union. It puts beyond any doubt that our future lies in the European Union at the heart of the common European home that we helped to build."

Taoiseach Leo Varadkar. Photo: Collins

Leo should demand an apology from Europe 

Ireland's return to levels of economic activity not seen since the credit bubble began to burst 10 years ago is not the only "lost decade" that deserves notice this summer. A decade has also been lost in reforming Europe's dysfunctional common currency regime and the same air of premature celebration is taking hold. Just as there is no guarantee of plain sailing for the Irish economy, critical weaknesses in the common currency design remain unaddressed.

Issues: Taoiseach Leo Varadkar outlines Ireland’s key concerns over Britain’s Brexit plans during his speech at Queen’s University in Belfast. Picture: Liam McBurney/PA Wire

Border issue means that customs union must stay 

Leo Varadkar's speech at Queen's University last Friday reflected (politely) his judgment that the British political leadership has wasted 14 months since the referendum in dodging the key challenges in implementing Brexit. The continuing retreat from reality saw foreign secretary Boris Johnson in New Zealand last week and the trade secretary Liam Fox in Argentina, exploring post-Brexit trade deals (aboard, metaphorically, the good ship Global Britain) to replace what will inevitably be lost in Europe.

Risky: British Prime Minister Theresa May responds to questions after she announced in the House of Commons last Wednesday that she has triggered Article 50, firing the starting gun on a two-year countdown to the UK leaving the EU. She seems prepared to risk no deal being arranged before Britain walks away Photo: PA Wire

Colm McCarthy: Ireland could be biggest Brexit loser after the UK 

Theresa May's resignation letter to Donald Tusk last Wednesday and his response on behalf of the European Council last Friday made explicit and prominent reference to exclusively Irish concerns in the upcoming Brexit negotiations, as did Guy Verhofstadt, who will represent the European Parliament when it comes to approval of the deal. Michel Barnier, the European Commission's chief negotiator, is on the record to the same effect. That all negotiating parties, British and European, have endorsed the principal concerns of the Irish Government, and in similar language, is a...

Bus Eireann is no longer a key provider and most travellers have other transport options. Photo: Damien Eagers

Bus row offers a chance to tackle transport realities 

While the suspension of strike notice at Bus Eireann and the resumption of talks between unions and management may result in some form of interim settlement, the underlying problems at the company, and more broadly in the CIE bus and rail business, are not being addressed. Demand for intercity public transport is in decline and the costs of meeting this demand through the CIE model are excessive. The minister has wisely kept away from the talks, keeping the taxpayers' chequebook out of danger for now. But the taxpayer remains on the hook for a system of public transport...

Irish ways: Dublin Port and Ringsend, where the proposed film studios would be built

State's cinema trip should be censored 

There is quite a spat under way about the possible location in Dublin's docklands of a new film studio, promoted by a former chairman of the Film Board and a group of film industry operators. They have their eye on some State-owned land, possibly land belonging to Dublin Port or alternatively part of the storied Irish Glass Bottle site which ended up in Nama. The chief executive of Dublin Port has accused the promoters of a 'land grab' no less, while they claim to be offering jobs, economic growth and all things good and wholesome.

Gamble: Boris Johnson, one of the Brexiteers hoping for a clean exit from the EU. Photo: Reuters

Let's end wishful thinking and look at the hard facts 

The UK Government is likely to trigger Article 50 of the Lisbon Treaty sooner than had been expected, in the first months of 2017, according to last Thursday's remarks from Foreign Secretary Boris Johnson. EU Council President Donald Tusk indicated last week that this was also Theresa May's timetable, only to be corrected by the UK prime minister. The Three Brexiteers in the UK Cabinet (Johnson, Liam Fox and David Davis) have been jointly charged with executing Brexit. While the division of responsibilities is unclear, all three appear to contemplate not just an accelerated...

Michael Noonan described the Commision's decision as 'bizarre' Photo: Tom Burke

US Treasury is owed the tax that Apple has avoided 

In 1935 Albert Einstein and two co-authors published an article in an academic journal called the Physical Review about the problem of quantum superposition, the idea that a subatomic particle exists in a combination of several alternative states. The act of observation affects the particle making it select just one of these states. The Austrian physicist Erwin Schrodinger concocted a thought experiment to illustrate the point. A cat is enclosed in a lead box with a device which might or might not have released a fatal dose. When the box is opened, the cat will prove to be either...

Money, money, money: Protesters in Milan demonstrate against what they called a 'bankers' government' in Milan in 2011. The Italian banking system is still in crisis today Photo: REUTERS/Stringer

Risk of new banking crisis as 'kick and hope' strategy runs out of road 

The acute phase of the eurozone sovereign debt crisis in 2012 was triggered in Italy, not in Greece or one of the other small peripheral economies. The European Central Bank eventually took action - an Italian collapse would have threatened the survival of the common currency - and crisis was deferred. But the eurozone banking system has not been fixed, and the extend-and-pretend tactic is facing another challenge. UK Prime Minister David Cameron's referendum gamble has not merely come unstuck, it has gone wrong at the wrong time.

DISSENT: Civil servants protesting against the pension levy in 2009 after the economy crashed. Photo: Damien Eagers

Ireland's two-tier pension system goes with a two-tier health service 

Ireland has long had a two-tier pension system to go with the two-tier health service. Some groups of employees are covered by decent occupational pension arrangements but many are not. Those who work in favoured sectors of the economy are fortunate, notably permanent employees in banks and in the public service, but there are very wide variations and many workers in the broader economy have little or no entitlement to income from an occupational scheme.

Trouble ahead: US presidential candidate Hillary Clinton speaking in Washington last week Photo: Getty Images

Ireland Inc may be a big loser in race for the White House 

Ten long weeks of government formation have produced an enormous list of concessions on public spending. The Independent deputies must feel they have been negotiating with the Make-a-Wish Foundation. A rough costing (remarkably there is none in the documents that have been released) puts the bill at €3bn in annual cost and leaves the State's finances ever more exposed to whatever problems are coming down the track. The problems in Europe, including the risk of Brexit and the continuing travails of the common currency, are not the only ones. The biggest threat to long-...

Visible minority: Anti-water charges protestors may be visible on the streets but most people have paid their bills, as those who live in rural areas have been doing for years Photo: Sunpix

Irish Water should have been set up decades ago 

The water issue is not the key challenge facing politicians. The infant recovery is fragile and the next government will need to focus quickly on more urgent domestic and external threats. Irish business is losing its competitive edge again, according to last week's report from the National Competitiveness Council. Public service trade unions are gearing up for another pay round, beyond the deal agreed at Haddington Road, which was supposed to run to 2018.

DUBLIN’S FINANCIAL CENTRE: Even if things go well in Ireland, there is no guarantee that the next year or two will not see a re-run of the 2012 sovereign debt crisis. Photo: Shahid A Khan

In 'fiscal space' no one can hear you scream 

The early days of the election campaign have been dominated by controversy about something called 'fiscal space' which must have had voters scratching their heads. What is this apparently precious commodity, and how large is Ireland's newly-discovered endowment? The phrase is borrowed from the vocabulary of debt sustainability analysis and rarely escapes the statistical appendices of IMF reports. It is a little unfair to inflict this unfamiliar piece of jargon on a blameless electorate.

HOPEFUL: Enda Kenny’s government can’t predict performance. Photo: Gareth Chaney Collins

The sums will only work if our luck holds 

When the economy entered recession in the final quarter of 2007, the budget was in surplus: indeed a surplus had been recorded for nine of the preceding ten years. Public debt was just 25pc of GDP, amongst the healthiest figures of any developed country. But the international downturn, accentuated by the domestic banking bust, was so severe that large tax increases and spending cuts ensued and a pro-cyclical adjustment, deepening the downturn, had to be pursued until 2014 when the austerity phase could finally be relaxed.

Michael Noonan

Let the good times roll . . . but be aware they won't be here forever 

The stream of good economic news in Ireland shows no signs of letting up. The budget deficit for 2015 will come in under target, due mainly to healthy growth in tax revenues, while unemployment continues to fall. But the external developments which have fuelled the turnaround are not guaranteed to last. When things improve so quickly it is foolish to extrapolate: the good times could roll a little longer but they will not roll forever.

Worries: Central Bank Governor Patrick Honohan

Crash didn't have to be quite so bad - now they tell us 

Bank crashes large enough to inflict substantial damage on taxpayers require failures at three levels. The boards and managements of banks need to incur large losses on dud loans. The regulators and supervisors need to miss what is going on, and to neglect timely remedial action. Finally, the Government needs to socialise a large portion of the losses, imposing them on taxpayers. That third failure, particularly the very broad state guarantee of bank liabilities, has dominated blame allocation in Ireland, but there is less information in the public domain on failures elsewhere.

‘Reliance on the tender mercies of the ECB should have taught us that when small member countries get into trouble, they can expect no favours'

Government borrows can of petrol to throw on an economy on fire 

'When you come to a fork in the road, take it' was the advice of the New York Yankees baseball legend Yogi Berra, who passed away three weeks ago. The Taoiseach used the 'fork in the road' metaphor to characterise the Government's Budget strategy in his Dail address on Wednesday, shortly after Fiscal Council chairman Prof John McHale had made it plain that the fork chosen was the wrong one. The Budget was needlessly expansionary for the second year in a row and the Government is trying to spend its way out of a boom.