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Archive for March 17th, 2011

Quick entry to report that the 17-strong grouping of the great and the good of Irish business, Ireland First, has made available its programme to help the country back on its feet. The programme has apparently already been handed over to the new government, and the understanding had been that the programme would not have been generally published until the grouping had discussed its contents with the government. Despite that it is now available.

With respect to NAMA, the suggestions aren’t all that contentious but are very light on detail – why, how, what resources needed, when – that type of thing. But I extract here the few words the grouping has to say on NAMA (remember that the group includes NAMA Top 10 developer Michael O’Flynn and One51 CEO, Philip Lynch who is in the wars at present with a court case dealing with a development on land in Waterford)

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“Very” might be the typical response. And as we celebrate St Patrick’s Day, there is much talk about a modern day banishment of the snakes blamed for our economic crisis – bankers, regulators, developers, politicians, planners. But in reality, Ireland is perceived to be a relatively honest country. Transparency International publishes what is probably the most highly regarded index on corruption and the latest survey for 2010 claims we are “very clean” – indeed, with a rating of 8.0, we are the 14th “cleanest” country in the world ahead of the UK, US, France and Germany.  We are considerably ahead of Spain at position 30 with a score of 6.1, Portugal at position 32 with a score of 6.0 and well ahead of  Greece at position 78 with a score of 3.5. So as PIGS go, we are quite clean.

Greece is combating its ingrained culture of graft as part of its engagement with the EU/IMF bailout. In Greece they have a special word for what we would call graft – fakelakia, pronounced fa-Kay-Likya. And it is endemic in Greek society. Want to get a medical procedure fast-tracked at your state hospital? The going rate is €150-7,500. Want to make the tax inspectors go away? The tariff there is €300-15,000. And if you really want that planning permission application to succeed the Greek menu says that will cost you €200-9,000. Other inconveniences in life like traffic infractions, poor examination results, having to interview for jobs are more a la carte. Still think that Ireland is “very” corrupt?

The domestic perception of corruption has been exacerbated by several tribunals and commissions, both for the results of same and in some cases by the operation of the investigations themselves. We have had four significant “financial” tribunals in the last two decades.

(1) The “Beef” Tribunal was established in 1991 to investigate tax evasion, malpractice and regulatory weaknesses in Ireland’s beef industry. It investigated in detail what was described as the unhealthy relationship between former Taoiseach Charles Haughey and “beef baron” Larry Goodman and examined the government’s role in providing export insurance to Larry Goodman in respect of beef sales to Iraq. It concluded in 1994 and its results were debated in the Dail on 1st and 2nd of September, 1994. It uncovered tax evasion and malpractice.

(2) The Moriarty Tribunal was established in 1997 to investigate the financial affairs of former Taoiseach, Charles Haughey and Deputy Michael Lowry. 14 years later and the Tribunal still hasn’t concluded its work, Charles Haughey died in 2006, the Tribunal has cost over €38m to administer so far and the final total cost has been estimated at €100m (UPDATE: 23rd March, 2011. Perhaps a quarter of a billion euros according to some sources). In the Irish general election last month, Michael Lowry was returned again as the deputy for his constituency of Tipperary North where he again topped the poll.

(3) The Mahon (also known as Flood) Tribunal was also established in 1997 to investigate corrupt payments to politicians in respect of building planning decisions in Dublin. 14 years later and the Tribunal still hasn’t concluded its work, the Tribunal has cost over €81m to administer so far and the final cost may well be substantially more.

(4) The McCracken Tribunal was established in February 1997 and had concluded in July 1997. Its purpose was to investigate secret payments by businessman Ben Dunne to former Taoiseach Charles Haughey and Deputy Michael Lowry. The Tribunal gave rise to the Moriarty Tribunal (see above) but is also noted for giving rise to criminal charges against Charles Haughey which were not progressed as a result of a controversial decision which judged that Haughey would not get a fair trial. Michael Lowry was found to have evaded tax when he received a payment from businessman Ben Dunne for an extension on his home in the 1990s,

In addition to the above tribunals, in the past two decades we have had three investigations into abuse of children by the Catholic Church, one of which, the Ryan Commission took 10 years to complete, we have the six-year long Morris Tribunal investigating the conduct of the Gardai (police) in County Donegal, the Travers Report which concluded that there had been systematic overcharging by the State of nursing home residents and two reports into Hepatitis C contamination and an investigation into the bombings in Dublin and Monaghan in 1974. UPDATE 6th June, 2011. There is also the Smithwick Tribunal which was launched in 2005 to investigate possible Garda collusion in the killing of two Royal Ulster Constabulary officers in 1989; in June 2011, the Dail sought to impose a time limit on the work of the Tribunal demanding a final report by November 2011. The cost and length of time taken to complete the work of the Mahon and Moriarty Tribunals have, in my opinion, severely undermined public confidence.

Beyond the above, there are strong feelings that white-collar criminals escape justice scot-free – that we lack the legislation, the law enforcement and judicial systems to deal with white-collar crime – and that political party funding is still too loose. There are commitments by the new government to address both these issues. There are outstanding transparency issues such as the absence of a house price database and public cadestre of property ownership, though again there are fresh political commitments in this area which are also enshrined in our bailout deal. More widely, there is the perception of Ireland still being a small country where your family, background and connections count more than merit in terms of career and social advancement. The same could be said of most countries and my own view is that we are not all that bad. Transparency International would seem to agree.

And so on this, our national day of celebration, perhaps it’s worth remembering that there are some fine aspects to this country, relatively speaking, which the current difficulties can’t denigrate. And which might help build the basis for our recovery. A happy St Patrick’s Day to you all!

UPDATE: 22nd March, 2011. The Moriarty Tribunal has published what its sole member Mr Justice Michael Moriarty calls the report which “concludes the substantive inquiries of this Tribunal”. The report is published in two parts – part one and part two. Remember that there had been a previous interim report in 2006. The report published this morning runs to 2,400 pages – RTE is providing some initial reporting here.

UPDATE: 22nd January, 2012. The Mahon Tribunal is set to report in coming days or weeks. The latest estimate of the cost of the Tribunal is €250m+.

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Have you ever had a meeting or date even, where you later establish that you have come away with an impression diagonally opposed to other attendees (or your date)? The reason I ask is that the IMF (and others) met with our newly-installed Minister for Finance, Michael Noonan (and others) yesterday. And here were the two assessments of the meeting.

IMF (statement)
“The mission chiefs for Ireland from the European Commission, the European Central Bank and the International Monetary Fund visited Dublin on March 15-16 at the invitation of the Irish authorities. The visit was an opportunity to hear the views of the new government on its economic program from Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin, as well as to meet senior officials. The discussions covered the economic outlook and the financial sector, and are an important input into next month’s review mission of the EC, ECB and IMF.”

Michael Noonan (transcript of RTE interview on Nine O’Clock News 16th March)
RTE presenter: Afterwards, the two ministers said that the bailout partners had not objected to a cut to the minimum wage being reversed.
Michael Noonan: No, the minimum wage I don’t believe will be a problem but what we were discussing was the fact that the troika accept that we are meeting the fiscal targets over the period in government.

From the Irish Times under the headline “EU and IMF accept Government proposals that differ from terms of rescue package”
“After the meeting, Mr Noonan said it was agreed the terms of the bailout deal would be altered, as long as the financial targets remain the same. “What was being discussed in general terms was our proposal that the conditions and the memorandum of understanding would be changed for alternative conditions which are in the Programme for Government,” Mr Noonan said. “And they have agreed to that principle. The detail then of the change will be discussed subsequently.”

And also in the Irish Times
“Senior officials from the IMF and the European Union have raised no objection to the Coalition’s programme for government although it contains proposals that run counter to the conditions in the €85 billion rescue package agreed with the previous Fianna Fáil-led government” and “Mr Noonan, when asked if the officials found any aspect of the programme unacceptable, replied: “No, if there is, they have not said it””

And from the Irish Examiner under the headline “EU and IMF give green light to Government plan”
“They have also accepted that the Government should wait for stress tests on the banks to be completed before pumping more money into them.”

Just to focus on the IMF which is probably less compromised in its treatment of Ireland than the EU/ECB, did Ajay Chopra, the Deputy Director of the IMF European Department agree to the following from the programme for government:

(1) Ireland to restore the minimum wage to €8.65 per hour and reverse the recent €1 per hour cut
(2) NAMA to abandon the transfer of sub-€20m loan exposures at Allied Irish Banks (AIB) and Bank of Ireland, thereby leaving some €16bn of generally toxic land and development lending, of doubtful value, at these two banks
(3) Ireland to adopt a wait-and-see stance towards the further recapitalisation of the banks (wait for the stress tests and see if the estimates for additional bailouts are sustainable)

Who knows, maybe he did agree to the above. Though wouldn’t such an agreement give rise to amendments to the Memorandum of Understanding requiring IMF Board approval?

Ireland has already received €14.4bn from the EU/IMF from the €67.5bn bailout (remember an additional €17.5bn is being provided from Ireland’s own resources to give an overall total bailout of €85bn) – according to the February 2011 Exchequer Statement we have received €5.8bn from the IMF and €8.6bn from Europe. To date, we have implemented relatively modest, though still painful, fiscal reforms through the enactment of last December’s Budget 2011.

Of particular interest on here is the €16bn of sub-€20m exposures at AIB and Bank of Ireland that the Memorandum of Understanding anticipated being transferred to NAMA. It is not clear if crystallising the value, and presumably losses, of these loans constitutes a “financial target” or a “fiscal target”. If it does, and if NAMA is not to value and absorb the loans, then some other evaluation mechanism is required – it is not an option just to park the loans without evaluating the losses. On the other hand, if crystallising the value of these loans is not a “financial target” or “fiscal target” then is the IMF, in particular, being neglectful in leaving the country with a banking sector built on a precarious foundation of toxic debt?

Somehow I have the impression that if yesterday was a date, Michael Noonan is telling his friends that it went swimmingly, that there’s a great future and all his jokes were hilarious. And the IMF might be thinking “let’s just remain acquaintances”.

UPDATE: 17th March, 2011. There was a press conference at the IMF in Washington DC today where the IMF communications director, Caroline Atkinson responded to a question received ”

I have a question on Ireland: “Can you comment on several changes that the new Irish government has made to the program agreed in December including reversing a lowering of the minimum wage?”

I would like to point to a statement that the new Irish government made earlier this month where they reaffirmed their commitment to the goals of the Irish program supported by the E.U. and the IMF, those goals of recapitalizing and improving the financial system, promoting fiscal stability and, most importantly, restoring Ireland to a path of sustainable growth and the government expressed its commitment to those goals.

We have just had a very short mission in Ireland and we issued a statement last night. The leader of our team on Ireland and the leaders of the teams from the E.U. and the European Central Bank were able to meet with the new Irish finance ministers on spending and revenue and listened to their views about the program. We will have a full-fledged mission in the first half of April I believe that will discuss all of the review issues in Ireland.”

So it seems that the IMF merely listened to Minister Noonan and that any substantive agreement-altering exchange of views is to take place in April 2011 (when incidentally we will have the results of the ongoing stress tests)

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