Archive for March 6th, 2011

Firstly I have not seen the draft and do not know its contents. Nor do I know the detail of the agreement worked out between FG and Labour and being presented to their respective constituents at 2pm this afternoon – Labour’s special 1,000-person conference and FG’s deputies and senators. There will be reporting here later as the confirmed details emerge and particularly those that affect the economy. Below is what is understood to have been the party positions and the likely agreement – neither the positions nor agreement have been confirmed.

With respect to economic policy, the suggestion in this morning’s press is that FG and Labour will implement the Fianna-Fail-created Four Year Plan (FF called it the “National Recovery Plan” – what will Labour and FG call it?). There have been suggestions, cynical perhaps, that Labour and FG will justify their modified plans by asserting that they have only now become aware of how bad the economic and banking figures are.

With reports that retiring deputies and ministers are making off with well over €13m in termination/first year retirement benefits – I say “making off” but I don’t mean to suggest they are kleptocrats in the same sense as the former president of Tunisia and his wife trying to make off with 1,500 kgs of gold worth €32m, the retiring politicians are getting their lawful benefits and no more, it just seems that when the country is on its knees that the payout levels are repugnant – and the incoming administration seemingly sticking to the same economic policies, there may well be more than a little national anger displayed by our “moderate and passive society

UPDATE (1): 6th March, 2011. The Labour special delegates conference is in progress (accessible here) and is scheduled to conlude at 5pm though that might slip as delegates are speaking over their alloted time. The Programme for Government titled “Towards Recovery: A programme for National Government 2011-2016” is not online yet. UPDATE (2): 6th March, 2011. We’re still waiting for an online version of the Programme for Government, seems like poor form to have a debate without the documentation being made available. That said, points that are emerging (a) A House Price Database to be introduced (b) Property taxes to be introduced (c) Further transfers to NAMA to stop (sub-€20m exposures at AIB and Bank of Ireland) (d) An effective minimum income tax rate of 30% (e) Retrospective reviews of commercial rents  – more soon… THE PROGRAMME IS NOW AVAILABLE HERE

UPDATE (3): 6th November, 2011. These are the NAMA-related commitments and other wider economic commitments

(1) We will end further asset transfers to NAMA, which are unlikely to improve market confidence in either the banks or the State. [Likely to mean sub-€20m AIB and Bank of Ireland exposures and possible some of the €5bn Paddy McKillen/other objector loans]

(2) We will insist on the highest standards of transparency in the operation of NAMA, on reduction in the costs associated with the operation of NAMA, and that decision-making in NAMA does not delay the restoration of the Irish property market [presumably the extension of Freedom of Information to NAMA and a register of non-performing loans and forcing NAMA to make sales even at firesale prices]

(3) Ghost Estates : We will mandate the Minster for the Environment, in conjunction with Local Authorities, to bring forward a coherent plan to resolve the problems associated with ghost estates. This plan will be developed in cooperation with NAMA. [NAMA to perhaps be less than commercial in its treatment of ghost estates, demolish rather than develop or mothball but presumably finish out part-occupied problem estates even if uncommercial]

(4) We will seek to capture some public good from NAMA by identifying buildings that have no commercial potential, and which might be suitable as local facilities for art and culture. [Arguably there are no building with o% commercial potential so this looks like flimflam]

(5) We remain committed to a smaller banking system that reduces its reliance on funding from the Irish and European Central Banks and volatile market sources. In order, however, to limit further calls on the State to cover bank losses from distressed asset sales, bank deleveraging must be paced to match the return of more normal market conditions
and demand for bank assets. As an interim measure, we will seek to replace emergency lending to our banks with
medium-term, affordable, official financing in a way that can restore confidence among other potential lenders in the liquidity position of our banks. [This seems contradictory, the banks need to deleverage on a massive scale but if they do so, it will be at firesale prices. Where will the replacement for emergency lending come from given that Irish banks are unable to raise funds through traditional money markets]

(6) We will establish a Strategic Investment Bank

(7) Within the first 100 days “Cut the 13.5% rate of VAT to 12% up to end 2013;  Halve the lower 8.5% rate of PRSI up to end 2013 on jobs paying up to €356 per week;  Reverse the cut in the minimum wage [restoring the €8.65 per hour rate];  Abolish the Travel Tax as part of a deal with airlines to restore lost routes;

(8) We will target up to €2 billion in sales of non-strategic state assets drawing from the recommendations of the McCarthy Review Group on State Assets when available [this probably rules the ESB out but it is unclear]

(9) In preparation for Budget 2013, we will review progress on deficit reduction, and draw up a plan which will achieve the objective of reaching the 3% of GDP target for the General Government Deficit by the target date of 2015. [no surprise there but this will be yet another welching on an IMF/EU bailout term but one that has been signposted and informally accepted]

(10) We intend to end the heavy dependence on a very limited pool of extremely expensive private solicitors firms providing legal services to the State and agencies, look at ways to require agencies to seek legal advice from the CSSO and not from the private sector in order to save costs, and ensure that legal work at the bar for the State is spread more equitably rather than confined to a very limited pool as at present. [The start of Arthur Cox’s decline?]

(11) We will establish an independent Fiscal Advisory Council (FAC), separated from fiscal decisionmakers in government, that would undertake official fiscal macroeconomic projections and monitoring. [So Ireland is to get the equivalent of the UK’s Office for Budgetary Responsibility]

(12) Reduce the total number of public sector employees by between 18,000 and 21,000 by 2014, compared to the total number at the end of 2010.  Reduce this number by a further 4,000 by 2015. [So less than FG’s headline of 30,000]

(13) The government will examine a number of proposals to assist struggling homeowners such as (a) Increasing mortgage interest relief to 30% for First Time Buyers in 2004-08 (from the current sliding scale of 20% to 25% depending on the year the mortgage was taken out), financed in part by bringing forward the abolition of relief for new
buyers from June 2011. (b) Introducing a two year moratorium on repossessions of modest family homes where a family makes an honest effort to pay their mortgage.

(14) We will improve the quality of information available on the Irish housing market by requiring that the selling price of all dwellings is recorded in a publicly available, national housing price database [A House Price Register!]

(15) We will legislate to end upward only rent reviews for existing leases.

(16) On the renegotiation of the bailout (a) We will attach the utmost priority to avoiding further down-grades to our sovereign credit rating by setting further capital spend by the State on bank re-capitalisation at a level that
is consistent with national debt sustainability and (b) We will seek a reduced interest rate as part of a credible re-commitment to reducing Government deficits to ensure sustainability of our public finances [So we will pursue an interest rate reduction but will frame burning the bondholders in the context of a risk of further downgrades by ratings agencies]

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Today’s Sunday Independent carries a claim that NAMA is finalising the sale of Penneys’ flagship store on Parnell Street in north central Dublin. The building, Chapel House at 21-26 Parnell Street, is reportedly owned by a Liam Carroll company and its upper floors are home to many of the companies in the Liam Carroll group including Zoe, Danninger, Dunloe Ewart, North Quay Investments and a web of other companies often used for single projects. Liam Carroll of course is a NAMA Top 10 developer whose NAMA loans, estimated at €1.7bn, were transferred in Tranche 1 last March-May 2010. Other current occupants of the building are Cybertrust, Norkom Technologies and Halifax, the Royal Bank of Scotland unit which quit the Irish market last year but is still managing residual business. And of course Penneys which the Independent claims is the buyer.

The price paid for the building by Penneys is reportedly €25m (€227 psf or in the new money €2426 psm). According to the estate agent blurb “Chapel House is a dramatic six storey office block totaling approximately 10,313 sq m (111,010 sq ft) of net lettable area. The building design offers companies the opportunity to occupy some of the largest single office floor plates in Dublin, while  still offering flexibility for sub-division.”

In late 2009, CBRE was offering 2,136 m2 (22, 992 sq ft) of office space in the building at an annual rent of €302 m2 (€28 psf) and car parking spaces at €3,200.

Separately, on Friday last, Google confirmed that it had acquired the Gordon House & Gasworks complex on Barrow Street. The complex is understood to be owned by another Liam Carroll company. The Sunday Business Post reported last week that it was thought that NAMA was involved in that sale but if that is so, it may only have been peripheral involvement as it is understood that the loans covering the two buildings were advanced by Bank of Scotland Ireland which of course is not a NAMA Participating Institution (PI – AIB, Anglo, Bank of Ireland, EBS and INBS).

There is a suggestion in the Independent that unspecified changes to accounting rules make outright purchase a preferable option at present and that this may be behind the recent Google acquisitions and this claimed sale. I’m not so sure.

UPDATE: 21st May, 2011. The Independent today confirms the sale. The new information is that Chapel House is set to  become the international headquarters for the Penneys/Primark business and the sale was handled by the receiver Ken Fennell of Kavanagh Fennell.

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