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Archive for January 8th, 2012

I think one of the best blogposts relating to Ireland’s economy last year came from Seamus Coffey, the lecturer in economics at University College Cork. The blogpost dealt with Irish wealth and proposals to introduce a wealth tax; it is particularly worth a read by some politicians who suggest a wealth tax will totally eliminate Ireland’s deficit.

This blogpost of mine today however is not about the substance of Seamus’s blogpost but a revelation uncovered whilst researching the data he uses; he found that a widely cited report on Ireland’s wealth by Credit Suisse was partly based on a report which is cited in the Credit Suisse bibliography as “Ireland, P. (2005): “Shareholder Primacy and the Distribution of Wealth”, Modern Law Review, 68: 49-81.” Seamus tried to obtain this report but when he did, what he found was flabbergasting – the report was written by someone called Paddy Ireland and had nothing to do with Ireland (the country) at all!

Or to put it another way, Credit Suisse’s analysis of Ireland’s wealth which is widely cited by those in support of a wealth tax is in part based on a report which has nothing to do with the country.

So, as it’s the weekend I thought you might have some fun with the following.

If UK topless model Jordan splits from her latest boyfriend, will Credit Suisse report “Middle East on the brink of collapse”?

If Robert Englund, best known for his portrayal of Freddie Kruger in the Nightmare on Elm Street series, sees his Hollywood earnings decline, will Credit Suisse report “UK in double-dip recession”?

If singer and actress Hannah Montana gets to the Billboard No 1, will Credit Suisse report “Californian economy overtaken by northwest state”?

And if Arnold Schwarzenegger who memorably portrayed “Dutch” in the film “Predator”, ever manages to run for president of the United States, will Credit Suisse report “Holland set for EU presidency”?

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The Sunday Independent today claims to have seen documentation from the Durkan Group – prominent developers of social housing in both Ireland and the UK – which doesn’t portray NAMA in a positive light. Durkan, which owed NAMA a relatively measly €43m, is reported to have repaid its loans in full, rather than deal with the Agency. The documentation reportedly says that Durkan found its dealings with NAMA to be “cumbersome, costly and time-consuming”. I suppose this criticism is to be expected; after all, NAMA demanded business plans from all of its debtors, even those like Durkan whose loans are said to have been performing and “good”. The business plan process was indeed bureaucratic as evidenced by the templates published by NAMA which developers needed complete. It was also “costly” in the sense that accountants and consultants were generating good business selling their services to developers to help get the business plans over the NAMA line.

But “uneconomic” terms imposed by NAMA? It is not clear from today’s report what is meant by “uneconomic” and a request for further information has been sent to Durkan. It probably doesn’t mean changes to interest rates that NAMA wanted on loans if those loans were performing, but it might mean NAMA wanted personal guarantees or other security on loans that presently have limited recourse beyond the original property for which the loan was advanced; NAMA might have demanded such terms in return for additional advances or not calling in loans because of falls in Loan To Values (LTVs). But whatever terms NAMA was demanding, in the end it seems that Durkan said “sod this”, repaid its loans in full and is now free of the Agency.

Now NAMA might again say that Durkan is not an objective commentator. But surely the Agency would not level the same criticism at one ofIreland’s most prominent judges, Mr Justice Peter Kelly?

Last summer last year, Durkan was involved in a court case where it was suing Phil Hogan’s Department of the Environment, Community and Local Government. The case was heard by Judge Kelly who examined NAMA’s behaviour in its dealings with Durkan, which at that time was one of NAMA’s developers. The judge said that in a number of cases that came before him, he had noticed delays of what he called “an inordinate period” at NAMA in dealing with its developers.

Durkan is at least the second NAMA developer to pay its way out of the Agency. Last month David Daly reached a settlement with NAMA whereby his loans were apparently refinanced outside the Agency.

UPDATE: 7th July, 2012. Showing that newspaper reporting isn’t always 100% accurate, it is reported today that Durkan is handing over a €31m award in a court case involving the Department of Justice, Equality and Defence, to NAMA, which would seem to suggest that Durkan hadn’t 100% exited NAMA at the start of the year.

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Dear Mr Cameron,

I see from the latest Exchequer returns for Ireland that, to the end of December 2011, we have received €481,730,000 from your good selves as part of the bilateral loan agreement entered into between our two countries just over a year ago. This €482m now received is part of the GBP 3,226,960,000 (€3.9bn) provided for in the agreement and which is expected to be drawn down in full over the next 24 months.

Now when these loans were first announced, you and your colleagues went to great lengths to explain to your constituents that providing these loans was in the best interests of Britain; this despite the many attacks on any bailout launched by some in your own party. You pointed to the close economic ties between our two countries, the thriving inter-country import/exports, and your Chancellor, George Osborne graciously said at the time “Ireland is a friend in need and we are here to help”

Of course the expectation is that Ireland will repay the bailout loan from you 100% along with interest, which up to last August 2011 was set at a level which delivered a nice profit to you, but after the EU decision to lower interest rates to cost on bailout funds, you followed suite and are now making a minimal amount of profit on the deal.

The bilateral agreement between our two countries allows you to visit and inspect the books, and examine anything else which may interfere with your loan. Next week from 10th January, we expect to see the return of the so-called Troika, the ECB, EU and IMF representatives who will carry out the quarterly review “mission” to check we are meeting the conditions laid out in the bailout agreement, and that we continue to make progress in eliminating our deficit so that we get onto a sound economic footing.

I write to invite you to send along your own delegation, as provided for in the bilateral loan agreement. Who might you send? Certainly not someone as likable as Vince Cable, he’s the type of man we tend to take to our hearts, plain-speaking without airs and graces. No, you might consider sending your chum from your days at Oxford– seen below in those old photographs which cause you such unease – present Chancellor, George Osborne. If he might wear his old Bullingdon Cub garb for his visit, that would be fine, in fact it might emphasise the point being striven for here.

Of course, your missionary would naturally be expected to arrive with an entourage and we should not be surprised to see it include a pharmacologist or an entertainments organiser.

Now it is the usual practice of the Troika missionaries to set up camp in a local hotel in central Dublin, for the duration of their stay, and your own missionary might consider the same. But why settle for an hotel when there are so much better, and more symbolic rooms available. George might consider rooming at Dublin Castle where in 1922 your national ancestors handed over military control of our country to local lad, Michael Collins. But Dublin Castle is not really adapted for accommodation so George might room a kilometre westwards at the home of our president in  the PhoenixPark. You may have missed our presidential election last year but it resulted in the septuagenarian Michael D Higgins taking up residence at the presidential home, Aras An Uachtarann together with his fragrant wife, Sabina. Michael D is a bit of a national institution and we were all very impressed when he said that he would accept a cut to his presidential salary – what we didn’t realise is that he meant he would accept €250,000, the same as the last incumbent Mary McAleese’s who voluntarily surrendered €75,000 per annum from the salary for the job which is a standard €325,000. When you consider that the role of Irish president is 99% ceremonial, you might raise that right eyebrow in the way that you do.

Given that you are now paying for this largesse with public funds, George might insist on rooming at the Aras. And in the evenings, George might put on Ralph and Ted skits, or indeed why not have donkey races along the corridors with Michael D and the wife offering piggy-backs?

Whilst rooming at the Aras, George might consider walking to work one day. In the course of the 5km from the Aras to Government Buildings, he might discover a lot about what is dysfunctional and wrong about our country today,. Firstly he might pop into the headquarters of the police service, the Garda Siochana which is also located in the Phoenix Park. There he might share a few words with the head of the force, Commissioner Martin Callinan. Now we don’t seem to know how much Martin is being paid but his predecessor, Fachtna Murphy was reportedly paid €250,000 a year and that was back in 2010.

George might continue his stroll along the quays, past the spanking new Criminal Courts of Justice and further along, the Four Courts. George might pop inside where he will see the best paid judges in Europe and the second best paid lawyers (Moscow apparently beats up to the top spot) interact together in one of our greatest Money Pits. Even though we had a referendum last October to allow judges’ pay to be reduced, at time of writing the salary of the Chief Justice is €295,000, President of the High Court gets €275,000, Supreme Court judges get €258,000 (each!), and the 35 High Court judges get €243,000. With such an expensive judicial system, George will no doubt come away thinkingIreland must have a very high standard of lawfulness indeed.

But George will not need go far before he notices a striking difference between central Dublin and central London: beggars, with an appreciation of spatial distribution  analysis that would make Starbucks envious, are everywhere. Begging you see is not a crime in Ireland, though last year when it was discovered that our old begging laws were probably unconstitutional, we introduced laws to make organising begging, and begging next to ATMs unlawful. But it is still perfectly legal to sit down on the pavement, organise your tools of the trade – blanket, box with a plea in black marker and oftentimes a cute animal – and beg.

Now I know George was a smoker, but like much of his past life he might have abandoned that vice also. But again, George will encounter about one hawker every kilometre offering his cheap cigarettes. These are generally smuggled genuine cigarettes on which no duty is paid. Perhaps being offered smuggled cigarettes won’t surprise George too much, but if he pops into a newsagent or even a branch of otherwise reputable chains, he may find that the cigarettes he buys are counterfeit. How can he tell? Buy menthol cigarettes which are notoriously difficult to counterfeit and he’ll immediately tell the difference.

Crossing over O’Connell Bridge (and taking note of the two strategically sited beggars on both sides of the road), George might find himself peckish and how better to satisfy your appetite than a good old kebab which provides most of your recommended daily calorie intake in one hit. If he pops into one of our most popular home-grown fast-food outlets, Abrakebabra, he’ll find a kebab and 330ml can of pop for €3.65 but only before 7pm, thereafter the price rockets to €8.95 though that includes 15 soggy chips. This will make George curious. If George wants more gentrified surroundings for a snack, he could do worse than pop in that old Dublin institution, Bewleys Coffee House on Grafton Street. But I would advise him against the €5.75 bread-with- dips for which he will get four slices of bland white bread and three absolutely disgusting dips (green pesto does not go well with white bread, the humus is like pate and the tomato dip is vile). Bewleys doesn’t have a vomitorium but it should. Both examples go to show that there is something dysfunctional about our hospitality businesses. But there is something dysfunctional about our businesses, full stop. Bewleys operates from a building  owned by a company controlled by NAMAed Johnny Ronan and NAMAed Conlon family, and is understood to have an upward-only rent review lease. Across the road, you will see a banner atop Korky’s shoe shop correctly calling the Government liars for abandoning their commitment to allow business tenants to have leases which reflected market rents, not rents four years ago which are double the market rate today.

And as George arrives down at Government Buildings he might like to ponder the salary scales of Irish politicians and compare them to your own. How is it that your salary is less than that of the Irish prime minister (or Taoiseach) especially given your range of responsibilities in an economy ten times bigger thanIreland’s is far more expansive.

And then you might further ponder how this country can afford such lavish salaries when it is bust; not just “bust” but you are loaning it money at a political risk to yourself and your party.

George said that “Irelandwas a friend in need andBritainwas here to help”. Wouldn’t a true friend have an honest head-to-head, and explain that the salaries and distortions cannot go on? I’m pretty sure that’s what your colleague, and bailout critic, Bill Cash might say.

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