The IMF - How soon ?

[poulgorm]

The government deficit is running at €20 billion (or is it 24). The public service unions will not tolerate any cutbacks that impacts on their members. Soon (how soon ?), the government will lose the confidence of the bodies that are currently loaning them money. Then, the only people who will lend them money will be the IMF. They will lend them money, but on conditions like... 50,000 public servants to lose their jobs. Dole to be halved (to UK levels). etc.

Lads and lassies, we are in for a rough ride.

The leadership of the public service unions should be put on trial for treason.

[BangorFeen]

Yes. Because it is all the fault of the public service unions... Do you read IBEC press releases for fun?

[poulgorm]

Copied from another thread. Sums it up perfectly for me:

"Yeah, 1.6 million private sector workers cannot continue to pay for 320,000 public sector workers who on average are earning 20% higher wages than those in the private sector, and have permanent pensionable jobs.

We should take to the barricades and tell those cunts and their propagandists in RTE that we just can't afford them anymore.

The bastards."

[Actin The Sham]

Yes. Because it is all the fault of the public service unions... Do you read IBEC press releases for fun?

Since 2001, the amount of public sector workers in this economy has increased by 45,000. Since 2001, the public sector wage bill has increased by €2.5 Billion.
Irrespective of who's fault it is, we cannot afford to continue to borrow €30 Million a day to pay the wages of the public sector.

Health, Education, & Social Welfare make up 75% of the spending of this country, therefore if you don't tackle those three areas you don't tackle the problem. Similarly, public sector workers earn on average 41% more here in Ireland then their counterparts in France.

[quincytwo]

Since 2001, the amount of public sector workers in this economy has increased by 45,000. Since 2001, the public sector wage bill has increased by €2.5 Billion.
Irrespective of who's fault it is, we cannot afford to continue to borrow €30 Million a day to pay the wages of the public sector.

Health, Education, & Social Welfare make up 75% of the spending of this country, therefore if you don't tackle those three areas you don't tackle the problem. Similarly, public sector workers earn on average 41% more here in Ireland then their counterparts in France.
The only purpose the private sector has is to provide for the public sector.
Communism is alaive and well in Ireland.

[Stall De Ball Biy]

How soon....is Now!

[BangorFeen]

Copied from another thread. Sums it up perfectly for me:

"Yeah, 1.6 million private sector workers cannot continue to pay for 320,000 public sector workers who on average are earning 20% higher wages than those in the private sector, and have permanent pensionable jobs.

We should take to the barricades and tell those cunts and their propagandists in RTE that we just can't afford them anymore.

The bastards."
Wow, you've bought the IBEC line hook line and sinker. I suspect your next point will be that you pay for their jobs?

[BangorFeen]

The only purpose the private sector has is to provide for the public sector.
Communism is alaive and well in Ireland.
And it only took 'til the fifth post.

[BangorFeen]

Since 2001, the amount of public sector workers in this economy has increased by 45,000. Since 2001, the public sector wage bill has increased by €2.5 Billion.
Irrespective of who's fault it is, we cannot afford to continue to borrow €30 Million a day to pay the wages of the public sector.

Health, Education, & Social Welfare make up 75% of the spending of this country, therefore if you don't tackle those three areas you don't tackle the problem. Similarly, public sector workers earn on average 41% more here in Ireland then their counterparts in France.
You'll get little argument from me on that. We cannot afford wahat we currently have. The entire cost base of this country has to be reset. Everything needs to come down here. If you were to cut the wages of public servants here though by 41% in the morning or anything like it (remember, that figure you quoted is highly biased by the earnings of the upper echelons) then all it would succeed in doing is financially ruining countless thousands of families because prices have not fallen by all that much (nothing like 41% at any rate) and people have finacial commitments based on their earnings.

In actual fact, broadly speaking I agree with much that is in the report and I certainly agree that the public sector unions are being partisan on this but then, so is IBEC. Hugely so in fact. Demonising the public sector has been a nice little defelction beam for all sorts of people who have done more than their fair share to bring us to the situation we are in.

[Actin The Sham]

You'll get little argument from me on that. The entire cost base of this country has to be reset. Everything needs to come down here. If you were to cut the wages of public servants here though by 41% in the morning or anything like it (remember, that figure you quoted is highly biased by the earnings of the upper echelons) then all it would succeed in doing is financially ruining countless thousands of families because prices have not fallen by all that much (nothing like 41% at any rate) and people have finacial commitments based on their earnings.

In actual fact, broadly speaking I agree with much that is in the report and I certainly agree that the public sector unions are being partisan on this but then, so is IBEC. Hugely so in fact. Demonising the public sector has been a nice little defelction beam for all sorts of people who have done more than their fair share to bring us to the situation we are in.

The OECD takes everything into account when making comparisons. Here is the comparison for Teachers from an OECD report:

Figure 4.3 shows that experienced primary-school
teachers’ salaries in OECD countries range from
just below per-capita GDP to just over twice as
high as per-capita GDP. Irish, Portuguese and
Spanish teachers stand out from other countries:
they earn 2.0 to 2.1 times GDP per capita compared
to less than 1.8 in the next-highest country,
the United Kingdom. Italian, Norwegian and
Swedish teachers have the lowest relative pay,
with ratios of 1.0 to 1.1.


The report in full is here:

http://www.oecd.org/dataoecd/39/62/1840245.pdf


Let's not believe the propaganda from ICTU and their mouthpiece in RTÉ anymore; let's stick to quantifiable facts, shall we?

[BangorFeen]

The OECD takes everything into account when making comparisons. Here is the comparison for Teachers from an OECD report:

Figure 4.3 shows that experienced primary-school
teachers’ salaries in OECD countries range from
just below per-capita GDP to just over twice as
high as per-capita GDP. Irish, Portuguese and
Spanish teachers stand out from other countries:
they earn 2.0 to 2.1 times GDP per capita compared
to less than 1.8 in the next-highest country,
the United Kingdom. Italian, Norwegian and
Swedish teachers have the lowest relative pay,
with ratios of 1.0 to 1.1.


The report in full is here:

http://www.oecd.org/dataoecd/39/62/1840245.pdf


Let's not believe the propaganda from ICTU and their mouthpiece in RTÉ anymore; let's stick to quantifiable facts, shall we?
Is that the same OECD that found we spend much less per head on public services than most of the rest of Western Europe? And what's "everything", ATS? Is that all teachers or what (genuine question as frankly, I don't have the time to go through an entire report). Does it consider that a teacher who takes charge of a class size that is substantially bigger than their European colleagues might command a higher wage? I'm not here to defend teachers by the way. There are pay cuts coming for all public servants; there have to be because we can't afford current rates going forward. I don't have a problem with that per sé but this focus o the public sector is allowing the employer's groups off the hook as one crowd of Irish workers seeks to turn the spit for another crowd of Irish workers. And suddenly slashing the wages of Irish PS workers will just succeed in making more paupers. A balance needs to be struck and the employers who made a nice wedge during the boom need to play their part too.

[Actin The Sham]

Is that the same OECD that found we spend much less per head on public services than most of the rest of Western Europe? And what's "everything", ATS? Is that all teachers or what (genuine question as frankly, I don't have the time to go through an entire report). Does it consider that a teacher who takes charge of a class size that is substantially bigger than their European colleagues might command a higher wage? I'm not here to defend teachers by the way. There are pay cuts coming for all public servants; there have to be because we can't afford current rates going forward. I don't have a problem with that per sé but this focus o the public sector is allowing the employer's groups off the hook as one crowd of Irish workers seeks to turn the spit for another crowd of Irish workers. And suddenly slashing the wages of Irish PS workers will just succeed in making more paupers. A balance needs to be struck and the employers who made a nice wedge during the boom need to play their part too.

We spend comparitively less. As a percentage of GDP.


But that was after Irish Civil Servants threatened to veto the publication of the report unless it was edited to suit their political agenda. So much for "independent research."

The true picture is quite different. Have a look at the difference between GNP and GDP for reference:

*************
GNP and GDP:
Good measures of economic development?

Definitions: GNP and GDP
You can think of GNP (Gross National Product) or GDP (Gross Domestic Product) as the amount of "stuff" - goods and services - that is produced.

The difference between GNP and GDP is a matter of the nationality of the producers and the location of production:

GNP = goods and services produced by Irish corporations in Ireland + goods and services produced by Irish corporations in other countries

GDP = goods and services produced by Irish corporations in Ireland + goods and services produced by foreign corporations in Ireland

You can think of these as measures of national output or income. GDP divided by the population would sometimes be referred to as per capita income.


Question: Do you think GDP or GNP is bigger in the case of Ireland?

Answer: GDP in Ireland is substantially larger than GNP due to all the Transnational Corporations (TNCs) in Ireland. This is at odds with the rest of the EU and the U.S. where GDP and GNP are fairly close.

************

So please, please, look at the comparative figures and stop clutching at the ICTU/Mandate straws.


With regard to teachers, if you divide the number of teachers into the number of students you get a figure of 16.

That is a pupil teacher ratio of 16 students to every teacher. These are the facts. Public sector workers are intransigent and refuse to be redeployed to where they are most needed, hence ICTU is able to witter on incessantly about the pupil teacher ratio being 28 students to every teacher.

Finally, we cannot afford to borrow €30 million per day anymore. We have to cut back. Private sector salaries and jobs have been cut drastically. Public sector workers need to face reality.

And this whole "turning worker against worker" mantra from the likes of David Begg fails to spot one important point: private sector workers are not as insulated from the recession as public sector workers. They are NOT all the same.

[Lostmeringtopaddypower]

Property and land price is the kernel of all problems in Ireland.

We destroyed our country with the property scam.

Cue mass emigration, house repossessions, civil unrest and our grandchildren paying off our bank debts.

Sad times.

[daithi81]

http://www.imf.org/external/np/tr/2009/tr062409.htm

Out of interest.

[How bad boy]

http://www.imf.org/external/np/tr/2009/tr062409.htm

Out of interest.

QUESTIONER: I was wondering if there's a possibility of the government defaulting in any way and the IMF talking to the Irish authorities about financing at this stage?
MR. MODY: There is absolutely no reason to think that the Irish authorities are going to default on their debt. There is no basis in the slightest for even considering such a possibility. And there is no discussion at this time on a Fund relationship within which the IMF that provides any financial support.

[daithi81]

Here is a video entitled 'IMF Outlook for Ireland':

http://www.imf.org/external/mmedia/view.asp?eventID=153 2

I'm too tired and busy to read/watch any of these.

[BangorFeen]

We spend comparitively less. As a percentage of GDP.


But that was after Irish Civil Servants threatened to veto the publication of the report unless it was edited to suit their political agenda. So much for "independent research."

The true picture is quite different. Have a look at the difference between GNP and GDP for reference:

*************
GNP and GDP:
Good measures of economic development?

Definitions: GNP and GDP
You can think of GNP (Gross National Product) or GDP (Gross Domestic Product) as the amount of "stuff" - goods and services - that is produced.

The difference between GNP and GDP is a matter of the nationality of the producers and the location of production:

GNP = goods and services produced by Irish corporations in Ireland + goods and services produced by Irish corporations in other countries

GDP = goods and services produced by Irish corporations in Ireland + goods and services produced by foreign corporations in Ireland

You can think of these as measures of national output or income. GDP divided by the population would sometimes be referred to as per capita income.


Question: Do you think GDP or GNP is bigger in the case of Ireland?

Answer: GDP in Ireland is substantially larger than GNP due to all the Transnational Corporations (TNCs) in Ireland. This is at odds with the rest of the EU and the U.S. where GDP and GNP are fairly close.

************

So please, please, look at the comparative figures and stop clutching at the ICTU/Mandate straws.


With regard to teachers, if you divide the number of teachers into the number of students you get a figure of 16.

That is a pupil teacher ratio of 16 students to every teacher. These are the facts. Public sector workers are intransigent and refuse to be redeployed to where they are most needed, hence ICTU is able to witter on incessantly about the pupil teacher ratio being 28 students to every teacher.

Finally, we cannot afford to borrow €30 million per day anymore. We have to cut back. Private sector salaries and jobs have been cut drastically. Public sector workers need to face reality.

And this whole "turning worker against worker" mantra from the likes of David Begg fails to spot one important point: private sector workers are not as insulated from the recession as public sector workers. They are NOT all the same.

And as a percentage of GNP? The truth of course is somewhere between the two as GNP isn't great for Ireland either BTW. I never said that pay shouldn't be cut. I think we would disagree on the severity though

According to the report you've linked to the average class size is 24, not 16 (just dividing like that is hopelessly simplistic anyhow given, for example, non-teaching principals in large schools) and Irish teachers put in many more classroom hours than most of their continental peers. This is from the OECD report above, pages 60-61 for your reference. Stop spouting figures in isolation before you lecture me about David Begg, ATS.

Also, I can't speak generally but I was never in a class of less than 30 pupils (bar some specialist subjects at LC level) the entire way up through my primary and secondary education. In primary school (Upper Glamire NS) my class size was 36.

And it is turning worker against worker. How many workers in the private sector have actually even thought about how their pensions were screwed over by the avarice of their employers???

Like I said, we've already had cuts in the public sector in the form of the pension levy. We aren't perched on an ivory tower and 2-3 of my colleagues facing the dole in the next few months are no different from their private sector counterparts. We'll have more cuts and that in principle is not something I would advocate striking over (at this juncture a counter-productive and frustrating thing. The Govt just doesn't have the grade anyhow). Making paupers of people to put a smug grin on IBEC's face though does not solve the problem.

What sort of % are you talking about, ATS. How much do you think we can bear?

Serious question.

[Actin The Sham]

And as a percentage of GNP? The truth of course is somewhere between the two as GNP isn't great for Ireland either BTW. I never said that pay shouldn't be cut. I think we would disagree on the severity though

According to the report you've linked to the average class size is 24, not 16 (just dividing like that is hopelessly simplistic anyhow given, for example, non-teaching principals in large schools) and Irish teachers put in many more classroom hours than most of their continental peers. This is from the OECD report above, pages 60-61 for your reference. Stop spouting figures in isolation before you lecture me about David Begg, ATS.

Also, I can't speak generally but I was never in a class of less than 30 pupils (bar some specialist subjects at LC level) the entire way up through my primary and secondary education. In primary school (Upper Glamire NS) my class size was 36.

And it is turning worker against worker. How many workers in the private sector have actually even thought about how their pensions were screwed over by the avarice of their employers???

Like I said, we've already had cuts in the public sector in the form of the pension levy. We aren't perched on an ivory tower and 2-3 of my colleagues facing the dole in the next few months are no different from their private sector counterparts. We'll have more cuts and that in principle is not something I would advocate striking over (at this juncture a counter-productive and frustrating thing. The Govt just doesn't have the grade anyhow). Making paupers of people to put a smug grin on IBEC's face though does not solve the problem.

What sort of % are you talking about, ATS. How much do you think we can bear?

Serious question.

I am at work right now. I am self employed and pay my taxes under the PAYE system.

Unfortunately I cannot afford to spend any more time debating this issue with you. Maybe I might come back to you over the weekend. But right now, I have to invoice some customers and get back to two others and confirm proposals with them. If I don't they may go to one of my competitors.

Sorry.

[poulgorm]

I have been a (permanent) public servant. This is what I think:

* The bulk of the work done in many departments is done by a handful of contract and temp staff. When the cuts come, these staff are tossed aside - SIPTU etc do not care a damn about contract & temp staff. They regard them as sub-human. Something, I suspect, to do with the weekly sub.

* Many public servants are hard working and give value for money. But there is a huge swathe that do not. Of those who do not, there are 2 types: (1) those who do fuck all and (2) those who do fuck all and also do their best to to make sure everybody else does fuck all as well. They stifle all changes: initiatives get strangled.

* I pity managers who try to take these groups on: I have seen it happen: the unions weigh in and more senior management leave them hanging out to dry. These managers quickly learn their lesson and never attempt an improvement initiative again.

The thing that really pisses me off about the public service unions is that they ensure nobody can lay a finger on these groups.

[BangorFeen]

I have been a (permanent) public servant. This is what I think:

* The bulk of the work done in many departments is done by a handful of contract and temp staff. When the cuts come, these staff are tossed aside - SIPTU etc do not care a damn about contract & temp staff. They regard them as sub-human. Something, I suspect, to do with the weekly sub.

* Many public servants are hard working and give value for money. But there is a huge swathe that do not. Of those who do not, there are 2 types: (1) those who do fuck all and (2) those who do fuck all and also do their best to to make sure everybody else does fuck all as well. They stifle all changes: initiatives get strangled.

* I pity managers who try to take these groups on: I have seen it happen: the unions weigh in and more senior management leave them hanging out to dry. These managers quickly learn their lesson and never attempt an improvement initiative again.

The thing that really pisses me off about the public service unions is that they ensure nobody can lay a finger on these groups.
I can only speak for my own unit but I genuinely can't think of any time-servers here. There might be but I'm damned if I can make them out. Genuinely.

[REMIMUFC]

_U5HpeA_WSo

[gozzy]

We all know that in order to reduce costs the gov will have to reduce expendature in the public service. Looking through this thread I get the impression that people are split only on the severity of these cuts.

With regard to the public service unions, I believe their stance to be illogical. That said, the unions are simply doing what their members pay them to do. The unions say that if you join their ranks they will do everything in their power to protect your job and your earnings, up to and including strike action. What pisses me off is that in order to fulfill that promise to their members they ignore or distort economic realities.

[johnmcork]

Wow, you've bought the IBEC line hook line and sinker. I suspect your next point will be that you pay for their jobs?

i love the way the communists have turned ibec into the boogie man.
look at the figures! 20 billion deficit!
what would you do? payrises?
why are people on the left supporting senior civil servants on 6 figure salaries?

[Proinsias]

We all know that in order to reduce costs the gov will have to reduce expendature in the public service. Looking through this thread I get the impression that people are split only on the severity of these cuts.

With regard to the public service unions, I believe their stance to be illogical. That said, the unions are simply doing what their members pay them to do. The unions say that if you join their ranks they will do everything in their power to protect your job and your earnings, up to and including strike action. What pisses me off is that in order to fulfill that promise to their members they ignore or distort economic realities.

Personally, I think the timing is wrong and Ireland should balls it out with a high deficit until unemployment growth stabilises and somewhat reverses.

It risks long term debt problems, but I say debt is a bigger problem if your workforce is not working than if it is.

[Proinsias]

i love the way the communists have turned ibec into the boogie man.
look at the figures! 20 billion deficit!
what would you do? payrises?
why are people on the left supporting senior civil servants on 6 figure salaries?

That's a long and inevitably tedious conversation that I neither have the time nor inclination to engage in.
I'd change your opinion on it though, if I tried.

Maybe next week, when thing are quieter.

[daithi81]

Personally, I think the timing is wrong and Ireland should balls it out with a high deficit until unemployment growth stabilises and somewhat reverses.

It risks long term debt problems, but I say debt is a bigger problem if your workforce is not working than if it is.

What happens when we can no longer borrow in, say, 2-3 years time (I would say the lower end of that scale)?

[johnmcork]

That's a long and inevitably tedious conversation that I neither have the time nor inclination to engage in.
I'd change your opinion on it though, if I tried.

Maybe next week, when thing are quieter.

:-D you're gas

[Proinsias]

What happens when we can no longer borrow in, say, 2-3 years time?

It might seem like a flippant thing to say, but that's not the important point.

Besides, from what I've read on the subject debt default, even though it's highly unlikely to happen, actually doesn't stop a country from borrowing in international markets for very long.

So do you suggest that forcibly increasing unemployment even further at the exact point when it is raging out of control is a good thing?

The biggest question in all of this is, do we want to achieve economic stability at the cost of social stability?

The second biggest question is whether or not the timing of these cuts is appropriate.

My answer to the two of those questions are that social stability should take precedence over economic stability and the timing of these cuts is wrong, they should be delayed until unemployment has stabilised and begun to recover.
I've a lot of workings on this one...

[quincytwo]

It might seem like a flippant thing to say, but that's not the important point.

Besides, from what I've read on the subject debt default, even though it's highly unlikely to happen, actually doesn't stop a country from borrowing in international markets for very long.

So do you suggest that forcibly increasing unemployment even further at the exact point when it is raging out of control is a good thing?

The biggest question in all of this is, do we want to achieve economic stability at the cost of social stability?

The second biggest question is whether or not the timing of these cuts is appropriate.

My answer to the two of those questions are that social stability should take precedence over economic stability and the timing of these cuts is wrong, they should be delayed until unemployment has stabilised and begun to recover.
I've a lot of workings on this one...

And who exactly will be lending to a defaulting country ?

[Wallace]

And who exactly will be lending to a defaulting country ?


Ocean Finance ?

[daithi81]

It might seem like a flippant thing to say, but that's not the important point.

Besides, from what I've read on the subject debt default, even though it's highly unlikely to happen, actually doesn't stop a country from borrowing in international markets for very long.

So do you suggest that forcibly increasing unemployment even further at the exact point when it is raging out of control is a good thing?

The biggest question in all of this is, do we want to achieve economic stability at the cost of social stability?

The second biggest question is whether or not the timing of these cuts is appropriate.

My answer to the two of those questions are that social stability should take precedence over economic stability and the timing of these cuts is wrong, they should be delayed until unemployment has stabilised and begun to recover.
I've a lot of workings on this one...

Well, I think the cuts can be phased in. I really don't see it as a dichotomous choice, as you put it. We can't put ourselves in a situation where we can't afford to run the country, in two years time. If this moment comes, the cuts we will have to make will be far more severe and abrupt. You are correct in saying that bond markets tend to forgive countries, after a while. But we are not talking a few weeks or months here. I think it better to plan cuts over the next 3-5 years, even if it means sacrificing some potential output.

[Proinsias]

Well, I think the cuts can be phased in. I really don't see it as a dichotomous choice, as you put it. We can't put ourselves in a situation where we can't afford to run the country, in two years time. If this moment comes, the cuts we will have to make will be far more severe and abrupt. You are correct in saying that bond markets tend to forgive countries, after a while. But we are not talking a few weeks or months here. I think it better to plan cuts over the next 3-5 years, even if it means sacrificing some potential output.
I'm not against cuts either, I just think this is panicing too early. Ireland still has a relatively low debt to GDP ratio, it can handle more.

Screw bond markets. We can source money from the ECB if needs be. I really don't think what's right for Ireland in the middle of one of the biggest economic crises to hit a developed country in the past 50 years should be driven by what bond markets think.

I would agree that gradual cuts are what's needed. What's being proposed will add a further half a percentage point to unemplyment by my calculations, it's too much right now.

I would actually tie the cuts to unemployment figures. Once unemployment looks like it could be turning around, then start laying off workers in the public sector.

Incidentally, if you want to increase consumption and regenerate activity in the wider economy, cutting welfare payments is just plain stupid. There is virtually no saving from welfare payments, the money is almost immediately circulated in the economy, especially at the lowest levels. It generates activity, which generates jobs.

Thus, by cutting welfare payments, you're going to reduce economic activities in the wider economy and result in further job cuts.

Jobs are the most important thing right now. Not some wishy-washy macroeconomic stability indicator. The Asian financial crisis showed us that in big flashing neon signs. This is what the IMF have been prescribing for decades and it just doesn't work. It's been shown time after time after time after time that cutting government spending at a time when the wider economy is in the shitter will make things worse.

Conversely, countries that have balled it out and taken the short term hit on their debt have recovered far, far faster in comparison.

[johnmcork]

surely it would be cheaper to have them on the dole than in overpaid jobs with nothing to do?
why phased/gradual approach,
you're not making sense

[Proinsias]

And who exactly will be lending to a defaulting country ?

The ECB. The IMF should be that lender, but they insist on such horrifically boneheaded policies (such as massively cutting public spending) that nobody wants to deal with them.

Thankfully, as rich countries are now in trouble, they've relaxed the rules on conditionality, so it's now possible to get a loan without all the moronic strings attached, but only if you're already rich.

Ireland is rich, so even if the IMF do have to come in, we should be ok.

They're still going to continue screwing up poor countries though.

[daithi81]

I'm not against cuts either, I just think this is panicing too early. Ireland still has a relatively low debt to GDP ratio, it can handle more.

Screw bond markets. We can source money from the ECB if needs be. I really don't think what's right for Ireland in the middle of one of the biggest economic crises to hit a developed country in the past 50 years should be driven by what bond markets think.

I would agree that gradual cuts are what's needed. What's being proposed will add a further half a percentage point to unemplyment by my calculations, it's too much right now.

I would actually tie the cuts to unemployment figures. Once unemployment looks like it could be turning around, then start laying off workers in the public sector.

Incidentally, if you want to increase consumption and regenerate activity in the wider economy, cutting welfare payments is just plain stupid. There is virtually no saving from welfare payments, the money is almost immediately circulated in the economy, especially at the lowest levels. It generates activity, which generates jobs.

Thus, by cutting welfare payments, you're going to reduce economic activities in the wider economy and result in further job cuts.

Jobs are the most important thing right now. Not some wishy-washy macroeconomic stability indicator. The Asian financial crisis showed us that in big flashing neon signs. This is what the IMF have been prescribing for decades and it just doesn't work. It's been shown time after time after time after time that cutting government spending at a time when the wider economy is in the shitter will make things worse.

Conversely, countries that have balled it out and taken the short term hit on their debt have recovered far, far faster in comparison.

I agree with your analysis, to an extent. But Asia in the 90's was not the same case as Ireland. Asia had high rates of private/public savings and relatively low debt-to-gdp ratios, and the IMF were completely wrong to prescribe public spending cuts. But I reckon Ireland is facing particularly acute public debt problems, in the very near future. Quoting current (public) debt-to-GDP ratios is a very naive stance, imo. We have extremely high levels of private debt, which will be assumed by the state when NAMA kicks in, not to mention the further capitialisation (and possible nationalistion) of AIB/BOI, which will follow the stripping of toxic assets. And all of this on top of the fact that we have an overbloated public sector. I don't see the need to panic, once we take gradual corrective action. But doing nothing will simply lead to meltdown.

I see it this way, we can take 5% welfare for the next five years, or we can leave it as it is and face anything up to 20-40% welfare cuts. Then you will see social unrest.

[johnmcork]

The ECB. The IMF should be that lender, but they insist on such horrifically boneheaded policies (such as massively cutting public spending) that nobody wants to deal with them.

Thankfully, as rich countries are now in trouble, they've relaxed the rules on conditionality, so it's now possible to get a loan without all the moronic strings attached, but only if you're already rich.

Ireland is rich, so even if the IMF do have to come in, we should be ok.

They're still going to continue screwing up poor countries though.

This is a wind up.

the era of cheap credit is over. this applies equally to nations as it does to households. why would you advocate expensive borrowing to maintain a clearly dysfunctional public sector. this kind of 1980's fianna fail style reckless borrowing is the last thing we need. ignoring reality and borrowing to pay people who play solitaire all day is far from sound economic thinking.
i agree that our social comittments are vital, i agree that this is ireland and not ireland inc. and we have a duty of care but i also believe we abdicate that duty when we borrow to pay principle oficers in the department of health 200k a year to do a job that is now done by someone else in the HSE.

[Lostmeringtopaddypower]

One thing is sure lads, the country is fucked beyond belief.

I actually feel sorry for Cowen - he has some mess on his plate.

Tackling the public sector spend alone is a mammoth task.

Cue utter carnage by latest December.

I reckon FF will be gone by Q1/10.

[Proinsias]

surely it would be cheaper to have them on the dole than in overpaid jobs with nothing to do?
why phased/gradual approach,
you're not making sense
I am.


I'm busy so I'll make it short.


On a simple calculation it looks cheaper. Employee paid by state: €50k. Unemployed: €10k. Saving: €40k.

It's not so simple.

I could write books on this, but here's 10 simple reasons that avoid the economics as much as possible:
1. It costs a lot of money to fire someone, especially a public sector employee. In the very short term, it will actually be MORE expensive because of redundancy payouts.
2. The pay of the employee is taxed. For a €50k employee, I reckon it to be in the region of €10k. It makes the gain from firing them less.
3. Presumably, they were doing something that was vaguely useful. What they were doing is no longer going to be done. Add that to the calculation.
4. Strikes. They're very, very, very expensive to deal with.
5. The amount that employees spend on other goods and services in the economy will be reduced dramatically, meaning that the companies that depend on their spending will be in trouble.
6. Jobs are destroyed much faster than they are created.This is especially true in the private sector, where job destruction is fast, creation is slow. In a situation where jobs are being destroyed very quickly and almost non are being created, accelerating job destruction is madness.
7. Cutting public spending hits the poor far, far worse than the rich. The poor are already fucked with unemployment. This creates more social problems, which are expensive to fix.
8. When the recovery does come, those workers fired from the public sector will be utterly unable to adapt. It's been shown that people who are unemployed for more than 6 months have great trouble getting back into work. In addition, there's a lot of literature on how difficult it is for workers to move from the public to the private sector. Those people are going to have to make both moves. It will create structural, long term unemployment.
9. The reduction of public services negatively affects business in a number of ways, such as health, education, security, transactional efficiency and so on.
10. Instead of putting the brakes on the increase in unemployment, it dabs on the accelerator. Confidence is key in these situations, especially in the creation of employment. It erodes confidence and makes a recovery less likely.



No. 5 is a surprisingly big one, as is 10. There's a lot of economics behind both that I've not explained.

[Proinsias]

I agree with your analysis, to an extent. But Asia in the 90's was not the same case as Ireland. Asia had high rates of private/public savings and relatively low debt-to-gdp ratios, and the IMF were completely wrong to prescribe public spending cuts. But I reckon Ireland is facing particularly acute public debt problems, in the very near future. Quoting current (public) debt-to-GDP ratios is a very naive stance, imo. We have extremely high levels of private debt, which will be assumed by the state when NAMA kicks in, not to mention the further capitialisation (and possible nationalistion) of AIB/BOI, which will follow the stripping of toxic assets. And all of this on top of the fact that we have an overbloated public sector. I don't see the need to panic, once we take gradual corrective action. But doing nothing will simply lead to meltdown.

I see it this way, we can take 5% welfare for the next five years, or we can leave it as it is and face anything up to 20-40% welfare cuts. Then you will see social unrest.

I'd love to deal with all of this, I just don't have the time.

Anyway, Ireland's starting debt-to-GDP ratio before this started was low, so it is a parallel. Debt was the biggest problem in many of the Asian countries, it's one reason why it hit South Korea so hard, their level of public+private debt at the time is very comparable to Ireland's.

The bit highlighted is the big problem alright.

NAMA isn't without assets though, so the calculations piling all of the liabilities from it onto the national balance sheet without considering the possible gains is, IMO, misleading. The Savings and Loans and Swedish banks examples show that, in the long run, a profit can be turned in these activities.

I would agree that some cuts are necessary, but I would have two sacred cows:
1. No job losses
2. Social welfare payments are maintained


I agree that social welfare is too high in Ireland, but it's not as if the money that ocmes from it isn't recirculated. In fact, it's one of the most efficient areas of fiscal stimulus we have. If we want to use government spending to save the economy, social welfare spending is certainly one area where it'll be achieved.

Counter-intuituve and I would agree that there are moral hazard problems, however people are not on the dole cause they want to be, they're on the dole because they don't have jobs.

[daithi81]

I'd love to deal with all of this, I just don't have the time.

Anyway, Ireland's starting debt-to-GDP ratio before this started was low, so it is a parallel. Debt was the biggest problem in many of the Asian countries, it's one reason why it hit South Korea so hard, their level of public+private debt at the time is very comparable to Ireland's.

The bit highlighted is the big problem alright.

NAMA isn't without assets though, so the calculations piling all of the liabilities from it onto the national balance sheet without considering the possible gains is, IMO, misleading. The Savings and Loans and Swedish banks examples show that, in the long run, a profit can be turned in these activities.

I would agree that some cuts are necessary, but I would have two sacred cows:
1. No job losses
2. Social welfare payments are maintained


I agree that social welfare is too high in Ireland, but it's not as if the money that ocmes from it isn't recirculated. In fact, it's one of the most efficient areas of fiscal stimulus we have. If we want to use government spending to save the economy, social welfare spending is certainly one area where it'll be achieved.

Counter-intuituve and I would agree that there are moral hazard problems, however people are not on the dole cause they want to be, they're on the dole because they don't have jobs.

Ok, your analysis of the Asian crisis runs contrary to what I have read. I believe I got it from Joseph Stiglitz's writings on the subject. Unfortunately, I don't have these books in Dublin, but he lambasted the IMF for 'forcing' these countries to borrow when they had substantial savings to work with. I could be wrong.

I did exclude the potential earnings of NAMA on purpose because they are not relevant to the matter at hand. The issue we have at the moment is what will become of the country in the next 2-5 years. The positive returns from NAMA are not likely to be felt until we are beyond this point. Of course, it all depends on how they set this agency up. It would be an idea if they issued bonds or shares for the agency itself, in order to raise funds for the exchequers coffers. It needn't be more than a 20% stake issuing, but that would raise a substantial amount, surely. The fact that we are so in the dark about what may become of this agency worries me.

Maybe it is possible to keep social welfare payments frozen over five years, as a comprimise, but the fact that An Bord Snip saw it as possible to lay off up to 17,000 public sector workers shows just how overstaffed some departments must be. We are writing cheques that we cannot cash and I must repeat, it is a case of act now is a gradual way, or simply wait for the cash to run out and then face laying off even more with massive spending cuts.

[Proinsias]

Ok, your analysis of the Asian crisis runs contrary to what I have read. I believe I got it from Joseph Stiglitz's writings on the subject. Unfortunately, I don't have these books in Dublin, but he lambasted the IMF for 'forcing' these countries to borrow when they had substantial savings to work with. I could be wrong.Stiglitz didn't really talk about South Korea a great deal in Globalisation.... I think Soros talks about it somewhat in his book on the matter, but I had to study South Korea quite a lot this year, so I've managed to pick up a lot on it. Ha-Joon Chang has an excellent book on the crisis too.

There are a lot of African states where the same is true, the mexican crisis of the early 90s was another case in point.

In fact, wrt the african states, the SAPs are thought to be one of the biggest factors in crippling long growth in sub-saharan africa over the past 3 decades, right up there with the war of the late 90s. The introduction of fees for education was particuarly damaging.


I did exclude the potential earnings of NAMA on purpose because they are not relevant to the matter at hand. The issue we have at the moment is what will become of the country in the next 2-5 years. The positive returns from NAMA are not likely to be felt until we are beyond this point. Of course, it all depends on how they set this agency up. It would be an idea if they issued bonds or shares for the agency itself, in order to raise funds for the exchequers coffers. It needn't be more than a 20% stake issuing, but that would raise a substantial amount, surely. The fact that we are so in the dark about what may become of this agency worries me.

Me too. In fact, most things the present government do worry me.

Maybe it is possible to keep social welfare payments frozen over five years, as a comprimise, but the fact that An Bord Snip saw it as possible to lay off up to 17,000 public sector workers shows just how overstaffed some departments must be. We are writing cheques that we cannot cash and I must repeat, it is a case of act now is a gradual way, or simply wait for the cash to run out and then face laying off even more with massive spending cuts.

17,000 is an almost 0.5% increase in unemployment.

It's easy to find "efficiency savings". Just don't offer services and, instead of proper reform, just reduce headcount in departments and expect employees to keep up (while using outdated and ineffective work practices).

It's why I think it must be gradually staged. Ok, maybe some cuts can be made now, but not almost 0.5% of the total workforce.

Reducing unemployment, not spending should be the primary aim of this government. Once unemployment starts dropping, then cut public sector employment

[i_didnt_do_nawtin]

But you can't reduce that unemployment by increasing the public sector payroll.
They need the private sector to start hiring again. To do this they'll have to spend money, through things like tax breaks for multinationals, or entrepreneurial schemes. That money has to come from the public sector.

That's how I see it anyhoo

[Stall De Ball Biy]

If the IMF come in, which its likely they will given indecision after indecision by this gutless government, they WILL slash 50,000 or more from the public service...thats the reality, thats where we're at!

[daithi81]

If the IMF come in, which its likely they will given indecision after indecision by this gutless government, they WILL slash 50,000 or more from the public service...thats the reality, thats where we're at!

Stop reading the Irish Independent.

[Wallace]

Talk of the IMF coming in is only a gambit designed to scare the eu into submission to our will.


It's all poppycock .

[Proinsias]

But you can't reduce that unemployment by increasing the public sector payroll.
You can but it's not generally a good idea (hair nicely split there).

They need the private sector to start hiring again. That is the most important issue. The question we need to ask is how?

To do this they'll have to spend money, through things like tax breaks for multinationals, or entrepreneurial schemes. Those things are all good for job creation and the answers given by folks who advocate the sort of policies the IMF push. It seems like good common sense. This is the nub of the problem Ireland is facing. The things that have worked before to create jobs, such as tax breaks or entrepreneurial schemes are unlikely to work, especially while unemployment is increasing.

Put yourself in the shoes of the entrepreneur or multinationals. The problems multinationals face at the moment won't be solved by a few tax breaks. Demand has fallen off a cliff for their products. No matter how many tax breaks Ireland gives, it can't make the customers of existing multinational companies want the products of those companies much more and thus prompt boosting production.

Of course, of we do attract new companies, those attracted by low taxes will be somewhat useful, but I'd question the long term value in bringing some of those companies in. The minute Ireland isn't the cheapest country for those firms to land, they'l take off again.

Entrepreneurs aren't invented overnight. Not only that, but they will fail. Over 90% of all startups fail in the first 5 years. Ireland's bankruptcy laws mean that failure is punished heavily. Not only that but customer demand is plummetting. Personally, I'm looking at starting something up myself but it's a terrible time to do it.

In general, start ups don't pick up employees quickly. They do it very slowly. It's not a short or medium term answer. Neither is bringing in MNCs tempted by low tax, they'll take years to arrive.


That money has to come from the public sector.

That's how I see it anyhoo

I agree, however, public sector spending CAN create jobs in the private sector. That's what's being lost in all of this.

I'll give a very simple example:

Johnny Builder gets €200 from the dole.

€100 of that goes on the weekly shop.
€30 goes on paying leccy bills, gas, phone and other household spending.
€50 goes to pay back debts.
€20 goes down the local boozer.

That spending (mostly) supports the local economy.

Say you cut social welfare by €20

Johnny cuts out the booze, along with his other dole friends.

Pub goes out of business, putting another 3 people on the dole queue.

I'm vastly simplifying here, but this mechanism does work.


One big problem is that the money he spends on something like paying back debts (a massive, huge proportion of Irish spending right now) disappears from the economy, into the capital stocks of the banks.

If we can address that, then a big part of the problem is dealt with.

Cutting spending now is just making a terrible present situation worse. I suggest the pain should be spread out a bit more and far smaller cuts be made.

[KMC]

If anyone in the public sector has to go, it has to be the people at the top. I'd start with the Department of Health as the Minister has no responsibilities as the HSE is in control of everything. After that the Department of Equality has to go as there is none. Trade, Enterprise and employment is next on the chopping list. T.D.'s, the President and the Judges should all take a pay cut.

The fact remains that once the recession is over the banks are going to make huge profit and the people who deliver vital front line services will suffer.

Before firing a single low level nurse, teacher or guard for example they should fire at least two levels of middle-top, middle-middle, middle-low managers who email our money away. The number of TD's should be reduced to 99 and the Senate should be reduced to 15.

[Proinsias]

If anyone in the public sector has to go, it has to be the people at the top. I'd start with the Department of Health as the Minister has no responsibilities as the HSE is in control of everything. After that the Department of Equality has to go as there is none. Trade, Enterprise and employment is next on the chopping list. T.D.'s, the President and the Judges should all take a pay cut.

The fact remains that once the recession is over the banks are going to make huge profit and the people who deliver vital front line services will suffer.

Before firing a single low level nurse, teacher or guard for example they should fire at least two levels of middle-top, middle-middle, middle-low managers who email our money away. The number of TD's should be reduced to 99 and the Senate should be reduced to 15.While I don't agree with everything you say, there are some good points there.

I have bank shares. They will come back into profit eventually and shareholders, like myself are likely to made a decent buck or two if the banks aren't nationalised.

The people who will suffer most from cutbacks are the people least prepared and least able to tolerate it.

If it's efficiency savings we want, yes, the top is where the knives should fall. Those with the highest levels of pay should be targetted first. There are very valid sociological reasons for this, in addition to sound economic reasons. Unfortunately, there's some organisational problems that are likely to result. Those with the highest pay are the most likely to have a fine pot of savings they can tap into. They're the least likely to spend all their income every month and thus the impact of their pay in the economy is lessened.

They're not likely to suffer as much from unemployment as the lower paid staff. Why? Well, it's that organisational factor I mentioned earlier, they're likely to be better paid, better qualified and have gained that high level of pay through achievements or experience. There's the risk of significant loss of organisational knowledge and capability by getting rid of the highest paid.

On the other hand, you could argue that the organisational risk posed by cutting the highest paid is lessened by the fact that, by in large, public service provision in Ireland isn't managed particularly well and an injection of new blood couldn't make it much worse.

It could, but I would bet people would be willing to take a risk on that than a guaranteed cut in services by cutting relatively poorly paid front line workers.

[poulgorm]

Some contriburors are saying we can continue to borrow because out debt / GDP ratio is, currently, relatively low. How long will it remain low if we continue to borrow €20 billion per annum?

Think back to the 1980s - repaying interest on the national debt exceeded income tax receipts.

You may argue that interest rates are lower now, but if the banking institutions think we are heading in the wrong direction, they will lend to us for a while - but at much higher interest rates. We have lost our AAA staus already.

When the government borrowed a few billion a few weeks ago, the interest rate charged was well up on what sounder economies are being charged - I have forgotten the figures, but it is a sign how things are going.

I don't think we have the will to rectify matters ourselves. Sectional interests are too powerful and cynical. The IMF will have to do it for us. And that will not be good.

Just heard in the news that Fleming owes a billion. Assets are practically worthless at the moment. And Fleming is not the biggest of them...

We cannot rectify this if we continue to pay ourselves more than the Germans, Brits etc are doing. And a hugely overpaid, dysfunctional public service.

Batten down the hatches! This will not be over for a while yet.

[daithi81]

Pwnsias - Have you come across any papers that attempt the measure the effect that welfare cuts have on GDP/GNP? Was there some kind of elasticity found?

[LawrenceSummers]

The sooner the better if you ask me.

this gov has consistently refused to make the changes that are needed in the public sector, maybe its time that we had someone do it for us. It might be painfull in the short term, but in the long term it could well be the best thing for us.

[How bad boy]

Pwnsias - Have you come across any papers that attempt the measure the effect that welfare cuts have on GDP/GNP? Was there some kind of elasticity found?
I have not, however I have seen some work on how much greater the multiplier effect is when it's channeled into welfare rather than anything else.

Could you really get an elasticity figure for welfare? I mean, that would suggest that there's both a supply and demand for it, which is true in some ways but it looks to me like a horribly biased way of looking at it.

The sooner the better if you ask me.

this gov has consistently refused to make the changes that are needed in the public sector, maybe its time that we had someone do it for us. It might be painfull in the short term, but in the long term it could well be the best thing for us.
I would agree that public sector pay is long overdue for reform, Ireland should have been saving like nobody's business for this. It was bleedingly obvious that the housing bubble would at a very minimum slow down. A quick look at tax receipts would show that one of the biggest income streams was stamp duty. Take just that away and Ireland was always going to have a big hole in its tax receipts.

You don't need economics training to tell you that at the end of a bubble, house sales slow or almost stop, even in the insane "soft landing" situation, which I have attacked on here enough over the years.

So we're not prepared for this situation, not even slightly. But, and this is the crucial factor, you don't make a man having a heart attack run a marathon. Ireland is having an economic heart attack.

These cuts will cause strikes. The next year is going to be unpleasant. Strikes hurt business too, the public sector unions will not just roll over and take this. The cost of these strikes alone to the Irish economy is likely to run into the billions.

[ho chi feen]

They HSE's staff are already on an unannounced semi-strike as it is, the rats. Lots of people taking their pay and refusing to do the work that needs doing.

[daithi81]

They HSE's staff are already on an unannounced semi-strike as it is, the rats. Lots of people taking their pay and refusing to do the work that needs doing.

Grand. 50% of them will be fired outright in three years. Simple.

[ho chi feen]

Grand. 50% of them will be fired outright in three years. Simple.

I'll shed no tears for them.

Hope they get to see what it's like to be made to wait three months for their rent allowance to be looked at by their replacements. :lol!:

[ho chi feen]

George Lee is on RTE radio 1 there now.

[ho chi feen]

Already halfway through, but it'd be worth listening in to when they put the news show online later on.

Interesting stuff.

"No to slash and burn economics... stimulate the economy instead of sticking to a deadline imposed by europe... those rules are set for normal circumstances, these are extraordinary circumstances"

When asked how can we afford to pay back money borrowed? "Unemployment costs money too... if we have nobody in work, we'll struggle to pay anything back"

[daithi81]

Already halfway through, but it'd be worth listening in to when they put the news show online later on.

Interesting stuff.

"No to slash and burn economics... stimulate the economy instead of sticking to a deadline imposed by europe... those rules are set for normal circumstances, these are extraordinary circumstances"

When asked how can we afford to pay back money borrowed? "Unemployment costs money too... if we have nobody in work, we'll struggle to pay anything back"

Like I said earlier, it's not a dichotomous choice. We need to service debt, while protecting as many jobs as possible, within reason.

[ho chi feen]

Yeah, I know. Was just trying to get across a flavour of what our next Minister for finance was saying.

[daithi81]

Yeah, I know. Was just trying to get across a flavour of what our next Minister for finance was saying.

And what job will Mr Bruton assume?

[ho chi feen]

And what job will Mr Bruton assume?

Fluffer for Mr. Lee? :o

[daithi81]

Fluffer for Mr. Lee? :o

I don't think Lee will get Minister for Finance, maybe Enterprise.

Remember one of those two is published economist, and the other is a journalist with an economics degree.

Big difference.

[ho chi feen]

I don't think Lee will get Minister for Finance, maybe Enterprise.

Remember one of those two is published economist, and the other is a journalist with an economics degree.

Big difference.

Fair point, didn't know that about Bruton. Lee will be the poster boy for RTE going into the next GE though, so he's bound to land a heavyweight position one way or another.

Makes a pleasant change from the schoolteachers and farmers mediocrities that make up FF.

[How bad boy]

Already halfway through, but it'd be worth listening in to when they put the news show online later on.

Interesting stuff.

"No to slash and burn economics... stimulate the economy instead of sticking to a deadline imposed by europe... those rules are set for normal circumstances, these are extraordinary circumstances"

When asked how can we afford to pay back money borrowed? "Unemployment costs money too... if we have nobody in work, we'll struggle to pay anything back"
He should stop reading my posts, the bastard.

[ho chi feen]

He should stop reading my posts, the bastard.

Listen back when it comes online later, you'll enjoy it Fwanky.

[How bad boy]

Don't have time.

Have the first full draft of my dissertation to hand up on Friday morning and still have much of my analysis to rewrite.
It is driving me mental.

[daithi81]

UCD Prof Karl Whelans notes on NAMA:

http://www.karlwhelan.com/IrishEconomy/gp-presentation.pdf

Wasn’t This Done in Sweden?

And didn’t the former Swedish finance minister back our approach?

No. The Swedish bank restructuring did not feature the government buying
assets from private banks.

All Swedish banks were required to write their bad loans down by very large
amounts and to obtain recapitalisation afterwards. Mr Lundgren told the
Irish Times that he “favours the more severe mark-to-market writedown of
assets rather than a ‘through the cycle’ valuation.”

Two Swedish banks were insolvent after these write downs. These were
nationalised and “bad banks” set up to purchase their assets.

Again Mr. Lundgren to the IT: “For me, it does not sound like the right
solution to buy assets from private banks.”

Also, while the Swedish bad banks made a profit because it bought assets at
low prices, the Swedish government as a whole lost money because the
insolvent banks had to be fully recapitalised.