Archive for January 27th, 2012

On Thursday 19th January, 2012 two Irish ministers, Brendan Howlin and Michael Noonan held a news conference in Dublin to mark the successful conclusion of the latest bailout troika review mission. Minister Noonan made a gaffe by referring to the scourge of Irish emigration as a lifestyle choice, though the Minister claimed his remarks were taken out of context. By popular demand, here is the full transcript of the question and answer so that you can judge yourself. Of more concern on here was that the Minister – no doubt with a desire to talk up the prospects for the country – made a mistake by claiming unemployment had fallen by more than it actually has (see below).

Mark Simpson from the BBC, can I ask you two questions about emigration. I assume that you factor in some sort of projection in terms of emigration, in terms of your overall financial figures, if you have any latest projections, could you share them with us? And secondly, what is your overall attitude to young people here who, rather than putting on the Green Jersey, are putting on the Australian Jersey in many cases.

Minister for Finance, Michael Noonan: Well, we have the Central Statistics Office who monitor these issues and they come up in the statistics. They’re not specifically factored into the budgetary process. What is factored in is employment and unemployment. And employment has remained quite high, we still have 1.8m people working in Ireland. I remember in the 1980s when times were quite bad, employment dropped down to 940, almost half so the situation is quite different . In December, unemployment steadied, actually for the first time in three years the Live Register went down, went down by about 3,000, the last time that happened I think was in 2007, and we hope it wasn’t just a one month event, that there’s a stabilisation. [According to the CSO, the seasonally adjusted Live Register for November 2011 was 446,500 which fell by 3,200 to 443,200 in December 2011. But if the Minister is referring to the monthly fall of 3,200 then it was only in December 2010 that the Live Register was 446,000 and it fell by 4,300 to 441,700 in January 2011 and then rose]

There’s always young people coming and going from Ireland, some of them are emigrants in the traditional sense, others simply, it’s a small island and they want to get off the island, a lot of the people that go to Australia, it’s not being driven by unemployment at all, it’s driven by a desire to see another part of the world. I have five adult children, three of them living and working abroad, I don’t think any of the three would be described as an emigrant, it’s a free choice of lifestyle and what they wanted to do with their lives. There’s a lot of families like that. Now there are other people being driven abroad alright. Now what has happened is that the collapse of the building industry has created a lot of forced emigration. The immediate effect of that was that over about a 15-month period, 100,000 people with building skills lost their jobs. And they’ve lost their jobs with absolutely no hope of for the bulk of them being re-employed in the building industry in Ireland. Because we’re not going back to a building and construction industry that’s 20% of GDP. And we can’t hold down that hope. And in Irelandwe’re trying to re-skill them, going into different categories.

But quite a number of them have emigrated and quite a lot of them are in Australia, some of them are in the UK, some in Germany, Young men in particular with skills in the building industry. It’s a very identifiable tranche of Irish people.

It’s not about putting on the Green Jersey and taking off the Green Jersey, that’s life in modern Ireland, to do their best and I hope that they’re successful abroad. What we have to make sure is, that people have the best possible education right up to third level so when they go, they’re employed as young professionals in their country of destination rather than the traditional image of Irish people from the 1950s.

UPDATE: 29th January, 2012. You might be interested in a 2-part feature on here last year which examined emigration in Ireland, particularly in an historical context – part one is here and part two is here. The following table took some time to research and I think it shows the historical scourge of emigration in stark terms.


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Villain of the past week, the ECB – which forced IMF bailout-programme country, Ireland to pay €1.25bn to unsecured, unguaranteed bondholders at a defunct bank – really is taking the biscuit for distorting, and in some cases, damaging intervention in the economies and societies of Europe. In Ireland, we have experienced the ECB sit on its hands in the early 2000s as core European banks lent colossal sums of money to Irish banks which was then poured into property, causing a bubble which has now burst with disastrous consequences set to last generations. And the Irish nation has found itself paying back inter-bank lending, partly from a foolish bank guarantee and partly under duress from the ECB. And we have an ECB which doggedly sticks to its primary remit of price stability (keeping inflation in check) when the obvious need for the EuroZone as a whole is to print euros and let inflation rise beyond the 2% ECB target.

But consider the latest wheeze on the part of the ECB – the so-called “Longer Term Refinancing Operation” or LTRO in December 2011.  This saw €489bn lent by the ECB to banks operating in the EuroZone, the ECB loans were for three years and at the main ECB lending rate which is currently 1%. The banks placed collateral with the ECB as security, but it is widely acknowledged that the ECB lowered the quality of collateral accepted. The LTRO operation was undertaken as part of the ECB’s remit in support of monetary policy. Monetary policy is where a Government or central bank seeks to support an economy through interest rates and money supply.

We saw during the week that Irish banks have used the LTRO funding to buy Irish government bonds paying 5.15% per annum. Which is pretty good business for the banks – they borrow at 1% and get paid 5.15% on their borrowings. Not only that, but sitting on Irish government bonds for three years is far easier – and cheaper – than lending to pesky households and businesses. After all some of those households and businesses may not repay loans, others may get into difficulty and each represents a small connection and there is great cost in administering such loans. Nicer to kick back and wait for Irish government bonds to mature!

It gets better. In February 2012, the ECB will undertake another LTRO operation and Irish banks may be able to pledge the newly acquired Irish govt bonds as collateral. So they get more funds at 1% and can then buy even more government bonds that pay 5%-plus. Isn’t it great to be a bank! Prior to the December 2011 LTRO, the previous longest LTRO was for 1 year and was issued in 2009. There has been a 6-month LTRO also but generally LTROs are for three months.

Unlike other businesses or industry, banks can get access to this cheap 3-year money from the ECB. By comparison, spare a thought for poor old Michael O’Leary (pictured above, left) who is run ragged as the CEO of Ryanair trying to build the world’s biggest airline. Michael, the schmuck, labours away at providing a real service to consumers, and trying to make a profit on his enterprise. How peeved must he feel when he looks over at other businesses – banks – who simply get lent 3-year money at 1% which they then “invest” in 5%+ yielding investments? God knows what he thinks about the uneven playing field between banks and his own business when trying to attract equity investment. You can only speculate if Michael stays awake at night, sore at the fact that he can’t use the assets in his own balance sheet to get 1% 3-year money from the ECB and then stick that in Irish government bonds. The poor eejit!

On the other hand, if you happen to be say, the CEO of Anglo – or IBRC as it is now called – Mike Aynsley, (pictured above, right) and just happen to have a bank licence or are a bank shareholder, then the ECB largesse is like manna from heaven. Pity that the funding is not demonstrably going into the real economy – households and businesses. And isn’t this what monetary policy should support? And if so, isn’t the ECB queering that as well?

The ECB was asked to comment on any consideration it had paid to competition issues before devising its 3-year LTRO operation in December 2011. Ryanair’s spokesman, Stephen McNamara was asked whether Michael O’Leary felt like a right eejit for slaving away on a proper business whilst banks have been given a licence to print profits and whether Ryanair might consider legal action on competition grounds. Neither has yet commented.

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