Archive for February 27th, 2011

For the first and last time, here is a purely political entry to mark the results of the general election. It looks like it will be a Fine Gael (FG)/Labour coalition with FG firmly in the driving seat, able to balance demands from Labour with the possibility of going elsewhere, particularly to independents, for coalition partners. In Irish terms where there hasn’t been a majority government since 1977-1981 when Jack Lynch’s Fianna Fail (FF) party held 84 seats in the then 148-member Dail. A coalition today was always the likely outcome, even if some FG members dreamt of a single party majority.

The election has been historic in the sense that the party at the centre of Irish politics since being founded in 1926 is today relegated to third position with Sinn Fein snapping at its heels and the Green party has not a single member elected. The country has certainly reconnected with politics. Consider the statistics – 533 candidates in an electorate of 3.2m (the population of the State has most recently been put at 4.47m) competing for 166 seats (technically 165 seats as the speaker of the Dail, Seamus Kirk was automatically re-elected). The turnout was 70.1% (up from 67.03% in 2007) and one in every 6,000 in the electorate was standing as a candidate. Compare that with our neighbours who held an election in the UK in May 2010 – 4,150 candidates, voting population of 44m, 649 constituencies and a turnout of 65.1% with one in 10,600 standing for election. Politicians here remarked at how engaged the electorate were on the doorsteps with elderly farmers apparently versed in the language of international bond markets – there might have been an element of plámás to this but you would have to go back to the 1950s to find a time when domestic political decisions have affected the everyday lives of people’s finances to the same extent as today. Back then it was protectionism and isolationism that hurt the country and it was political leadership that helped the country get back on its feet. The 1970s oil shocks and the early 1980s global recession were largely outside factors whose solutions dwarfed the talents of domestic politicians and were arguably resolved by external factors.

And what of the man himself, Enda Kenny the 59-year old leader of FG, who secured the highest number of first preference votes in the State yesterday (17,472 – some 397 more than Shane Ross’s 17,075). He acknowledged that his key speech yesterday “Let the word go forth from this time and place ..” borrowed from John F Kennedy but alas Enda is no great orator and his speeches in the Dail often come across as whiney and do not land punches. Just eight months ago, he was fighting for his political life as a sizeable portion of his party including his finance spokesman, Richard Bruton, sought to have him replaced in a leadership “heave” (an Irish use of the word which means an attempt to oust a party leader from within). A criticism I have heard many times particularly during the election campaign is that Enda the man does not inspire confidence in his own personal qualities as a leader. He displayed what many saw as a divaesque streak in refusing to take part in a debate during the election campaign with FF and Labour leaders on commercial TV channel TV3 – his excuse being that the debate’s moderator, Vincent Browne had comically suggested last year that Enda might commit suicide and Enda took offense at this because suicide is seen as an issue in the country which ranks no 35 in the world with its suicide rate. We must hope that IMF managing director Dominique Strauss-Kahn doesn’t  badmouth the back-row defence of Enda’s beloved Mayo gaelic football team, otherwise Enda might decide not to meet with the IMF to renegotiate the bailout deal.

There will be some who claim that FG’s success today is really about FF’s tenure in power during the worst economic crisis since the 1920s and less about FG’s own policies, that all FG needed do was stand still and watch FF slide into near oblivion. Circumstances have made Enda lucky, some might say.

But for all of that, Enda is not a candidate on X-Factor. You don’t get to lead the biggest party in the State through luck alone.  He is credited with being central to rebuilding the party after its relative wipeout in 2002 when the party took just 31 seats. Recently, looking over the Dail debates on the ill-fated guarantee of the banks I was struck by how prescient Enda was in foretelling the eventual pitfalls and in many respects it’s as if his speech back on 30th September 2008 was written in February 2011, such is the accuracy of the concerns expressed then compared with the actual consequences of the guarantee. It is regrettable that he did not press his concerns. Though he might say that it is the nature of opposition politics that the best you can do is ensure concerns and counterarguments are put in the public domain.

Alongside the everyday challenges of running a country, he must immediately deal with the inherited legacy of the IMF/EU bailout. We are already in breach of the bailout terms and the forbearance of our lenders is likely to rapidly disappear – we’ve had the election, the government has a fresh mandate and now it will be expected to get on with implementing the bailout. FG might claim that the mandate given allows the country to wait for the results of the stress tests of the banks in March 2011 before taking the next recapitalization steps but it is likely our lenders will leave FG in no doubt we need implement the bailout terms and they may well remind us that the IMF/EU has already provided €11bn to the country. FG has committed itself to renegotiating the IMF/EU bailout deal which would appear to involve seeking a licence from the EU to write-down bondholder debt and a reduction in the interest rate of the EU element of the bailout deal. And it seems that our 12.5% corporation tax rate is again at risk with Angela Merkel most recently circling our low tax rate. Enda will have his hands full and expectations are high.

So Enda is not the Messiah, but relative to the alternatives he is the best we have. His challenges have already started as he must put a resilient government in place in the next few days. His honeymoon period is likely to be short and the mantra that it is all FF’s fault will become old very quickly. I wish him luck.

And to finish on a finance note, there is one initiative I would like to see quickly implemented to remind us that FG’s focus is “Let’s get Ireland working” and remember both it and the Labour party placed employment and jobs at the heart of the policies. It is to do with our reporting of unemployment. Consider the following reporting from the BBC on our election “Unemployment in the Republic currently stands at 13.4%, meaning 450,000 are out of work. Unemployment benefits have recently been cut back.” This of course is rubbish – although the unemployment rate is indeed 13.4% that translates to approximately 299,000 unemployed. If you ask the man in the street though, how many are unemployed in the State, he will probably reply in the 450-500,000 range. And indeed there are some 442,677 on the Live Register which includes all sorts of recipients of employment benefits. On an International Labour Organisation (ILO) basis, our unemployment rate is 13.4% however, the number available for employment as at the end of the Q3, 2010 was 2,150,500 and the number unemployed on an ILO basis is 299,000. Each month the Central Statistics Office (CSO) reports the Live Register and gives an estimate of the unemployment rate. And every month, the man in the street believes there to be nearly half a million unemployed. And those looking at our small country (like the BBC above) believe that there are 450,000 unemployed. Given that we have a population of 4.47m and a famously young population, you can hardly blame the conclusion that we are a basket case if we truly had 450,000 unemployed which would equate to over 20%. The initiative I would like to see is a change to the way the CSO presents information each month and that the CSO simply produces unemployment information on an ILO basis. Indeed I would like the CSO to go further – given that each Friday we must now produce reams of financial and banking information for our IMF/EU lenders why is it that each Monday we don’t produce unemployment information so that no-one in government or elsewhere loses sight of the tragedy which is the true unemployment level.

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