These events may force Ireland to rise the corporate tax rate as the cut in U.K corporate tax may be followed with future cuts and other European countries following the U.K's example. 12.5% may not give us such a competitive advantage as it has done with rising tax rates in other areas of Irish products and services.
Tuesday, November 30, 2010
Sustainability of the precious 12.5% Corporation Tax
Rising objection in Europe to the 12.5% corporation tax in Ireland coupled with the objectives of the 4 year plan has lead me to wonder about the sustainability of the corporation tax and its competitiveness. The 4 year plan highlights are a rise in V.A.T, a reduced minimum wage and the introduction of new taxes like water tax but no change to our corporation tax. This protection of a source of potentially a huge tax revenue (with only a small increase in the tax rate) places the tax rate central to the Irish governments strategy for future growth. How long will this last with Europe's rising interest the level of corporation tax and with the U.K announcing today a cut in corporation tax, to stop domestic companies setting their base in Ireland and encourage them to stay in the U.K.
European still faced potential crisis
The information of Ireland get €85 billion from the International Monetary Fund (IMF) has not eased the worried of European market. The investors worried about the outbreak of other countries in the Euro zone sovereign debt crisis. Portugal’s debt crisis just around the corner, Spain has also been named may be the next “bomb”, even Belgium and Italy are all in the blacklist. Suppressed by this, the Euro/US Dollar below 1.3100 marks, while someone think the euro will fall to 1.2000.
There was an article named Time to send the barber home on The Economist website has been written the European Ministers tried to soothe the wailing with two (actually, three) promises: first, they drew up an €85 billion ($130 billion) of loans for Ireland to try to quell the immediate crisis. Second, they quietly agreed to consider extending the three-year repayment period for Greece, which was bailed out in May, to match the more generous loan term for Ireland. Third, they issued a promise that, under a future mechanism to resolve debt crises, holders of European government bonds were not in danger of losing their investment any time soon.
Will all this assuage the cantankerous markets? Still in this article, Olli Rehn, the EU's economic-affairs commissioner, who said there should be a new set of bank stress-tests next year, not just in Ireland but across the EU. This is an admission that the last lot of European stress-tests were flawed, in turn casting doubt on the heath of the banking sector, in turn raising the prospect of more banks having to be recapitalized by taxpayers, in turn increasing the danger to public finances.
MR Rehn was adamant that senior bondholders of Irish banks due for restructuring would not have to take losses, an option that the Irish government had been considering. "There will be no haircut on senior debt, not to speak of sovereign debt,” declared Mr Rehn. Brian Cowen, the politically crippled Irish prime minister, explained that the EU would not agree to such a radical course because it could destabilise the European financial system. There was no “political or institutional support” for the idea, he said.
Another sign that all is not well is the hint by Didier Reynders, the finance minister of Belgium, which holds the EU's rotating presidency, that the successor to the EFSF would have to be bigger. He did not quite spell it out that way, but his comment that “we need to have the largest size possible...to be able to give an answer to the crisis”, backed by Mr Rehn, seems to confirm reports of behind-the-scenes pressure to increase the size of the bail-out fund—if not immediately, then at least when a permanent one is created in 2013.
http://www.economist.com/blogs/charlemagne/2010/11/euro-zone_crisis
Rate of lending declines again
Lending to households and businesses declined again in October, according to the latest data from the Central Bank.
Loans to households fell at an annual rate minus 4.9 per cent last month, following an annual decline of 4.5 per cent in September.
The Central Bank said lending for house purchase was 1.6 per cent lower on an annual basis in October, while lending for consumption and other purposes fell by 16.3 per cent.
Loan repayments totalled €7 billion for the ten months to the end of October, compared €1.7 billion over the same period last year.
The data showed lending to businesses decreased by 5.2 per cent on an annual basis last month, following an annual decline of 3 per cent in September.
Irish domestic lenders increased their reliance on European Central Bank (ECB) funding by 3.3 per cent in October as they lost deposits and markets remained volatile, the figures showed.
The ECB funding reliance of domestic lenders, including Irish and foreign-owned retail banks, rose by €2.7 billion to €85.7 billion from September
http://www.irishtimes.com/newspaper/breaking/2010/1130/breaking29.html
Rate of lending declines again
Lending to households and businesses declined again in October, according to the latest data from the Central Bank.
Loans to households fell at an annual rate minus 4.9 per cent last month, following an annual decline of 4.5 per cent in September.
The Central Bank said lending for house purchase was 1.6 per cent lower on an annual basis in October, while lending for consumption and other purposes fell by 16.3 per cent.
Loan repayments totalled €7 billion for the ten months to the end of October, compared €1.7 billion over the same period last year.
The data showed lending to businesses decreased by 5.2 per cent on an annual basis last month, following an annual decline of 3 per cent in September.
Irish domestic lenders increased their reliance on European Central Bank (ECB) funding by 3.3 per cent in October as they lost deposits and markets remained volatile, the figures showed.
The ECB funding reliance of domestic lenders, including Irish and foreign-owned retail banks, rose by €2.7 billion to €85.7 billion from September
http://www.irishtimes.com/newspaper/breaking/2010/1130/breaking29.html
Farming in recession
Cuts to come from everywhere
Given that agriculture is an industry in IrelandI feel that we must (and will) all share the painand agriculture is no exception. The current schemes are designed to help small farmers (which it does) actually aids the bigger farmers far more. Big farmers can benefit from economies of scale while obtaining grants per head of stock which are likely to be far greater. As a result the large processing corporations are able to set lower prices for goods. It is possible that if some welfare schemes are reduced then the agricultural industry as a whole would become more efficient.
The report outlines possible areas for cuts, these include the Farm Assist, Suckler Cow Welfare Scheme , forestry grants, Fallen Animal Scheme and Disadvantaged Area . It is also believed that cuts will follow the guidelines set out by Colm McCarthy in the Snip report. These areas include a 30% cut in Suckler Cow Welfare Scheme and the Disadvantaged Area Scheme which would amount to savings of €110 million.
Its expenditure has also dropped by €200m in the last 12 months following cuts to the DAS, SCWS and Fallen Animal Schemes and the closure of programmes such as REPS4 and the Early Retirement.
Given that some of the schemes are “100% funded by the Irish taxpayer” it is only fair given cut
backs in all sectors that the farming industry shares some of the burden. It may only a small pebble in the €85 billion borrowed yesterday but we’ll have to start somewhere.
http://www.independent.ie/farming/imf-axemen-target-euro400m-of-farm-cash-2432277.html
Given that agriculture is an industry in IrelandI feel that we must (and will) all share the painand agriculture is no exception. The current schemes are designed to help small farmers (which it does) actually aids the bigger farmers far more. Big farmers can benefit from economies of scale while obtaining grants per head of stock which are likely to be far greater. As a result the large processing corporations are able to set lower prices for goods. It is possible that if some welfare schemes are reduced then the agricultural industry as a whole would become more efficient.
The report outlines possible areas for cuts, these include the Farm Assist, Suckler Cow Welfare Scheme , forestry grants, Fallen Animal Scheme and Disadvantaged Area . It is also believed that cuts will follow the guidelines set out by Colm McCarthy in the Snip report. These areas include a 30% cut in Suckler Cow Welfare Scheme and the Disadvantaged Area Scheme which would amount to savings of €110 million.
Its expenditure has also dropped by €200m in the last 12 months following cuts to the DAS, SCWS and Fallen Animal Schemes and the closure of programmes such as REPS4 and the Early Retirement.
Given that some of the schemes are “100% funded by the Irish taxpayer” it is only fair given cut
backs in all sectors that the farming industry shares some of the burden. It may only a small pebble in the €85 billion borrowed yesterday but we’ll have to start somewhere.
http://www.independent.ie/farming/imf-axemen-target-euro400m-of-farm-cash-2432277.html
EU outlines rescure for Ireland
Europe sealed a 67.5 billion bailout of Ireland Sunday. But this plan will share the pain with banks and other private-sector lenders is a message that the munificence won't continue forever. they also become more wary of lending to portugal and Spain, then stoking fears of toppled dominoes along the euro-zone's weak perimeter. According to the decision of Sunday, a new undetermined size bailout fund will replace the 440 billion temporary facility which now being used to help ireland. European taxpayers and IMF have stepped into the breach with cash for Greece and Ireland before the the bailout fund being acted. Since debt relief is excluded in the plan before 2013, Ireland has to face several years of mounting debt and searing budget austerity. The Irish package includes 50 billion euros to prop up government finances and billions for banks which comes from EU and IMF.The latest bailout is a blend of loans, some for as long as 10 years, and at an average interest rate of around 6%. I covers the Irish government's financing requirement for more than two years to cut its deficit and solve banking troubles. The total package is 85 billion euros at most and the Prime Minister Brian Cowen said it is essential. And Ireland bank will try again to adding more capital to banks to give investors and depositors more confidence to survive its ailing banking system.
GDP Growth to be 50% less than target
According to an article by Ann Cahill in today's Irish Examiner GDP is to be lower than forecast. The European Commission has forecast that Ireland's GDP growth will be about 50% lower next year than the Government had predicted when drawing up the four year budget plan
One of the reasons for the decline in the expected GDP is due to the reduction in consumption, which is mainly due to lower income. The Government had forecast growth to be 1.75% however the European Comission has reduced this forecast to 0.9% growth.
Consequently, the state budget deficit will now not be reduced to 3% until 2015 rather than the taget year of 2014. According to the article the IMF, European Comission and ECB also believe 2015 is a better target.
However, the deficit could take longer to decrease if banks need more funding and depending on unemployment.
http://www.irishexaminer.com/business/gdp-growth-to-miss-target-by-half-ec-forecasts-137965.html
One of the reasons for the decline in the expected GDP is due to the reduction in consumption, which is mainly due to lower income. The Government had forecast growth to be 1.75% however the European Comission has reduced this forecast to 0.9% growth.
Consequently, the state budget deficit will now not be reduced to 3% until 2015 rather than the taget year of 2014. According to the article the IMF, European Comission and ECB also believe 2015 is a better target.
However, the deficit could take longer to decrease if banks need more funding and depending on unemployment.
http://www.irishexaminer.com/business/gdp-growth-to-miss-target-by-half-ec-forecasts-137965.html
Saturday, November 27, 2010
The article I read from Economist is titled “Will today’s currency interventions hurt or help the world economy”. After global financial crisis, every country wants its own economy recover rapidly by adjusting monetary policy. To stop domestic currency rising is the goal for each government, however their behaviors are very difference. For instance, Japan sold 23.6 billion dollar on 15th September, “Switzerland quadrupled its foreign reserves that to $219 billion, between September 13th and 16th Brazil’s central bank bought dollars at a rate of $1 billion a day, and China has built up 2.45 trillion dollar of reserves thanks to its determination to keep the yuan stable against the dollar”. From the view of author, economy recovery of the rich world needs reflating and a weaker dollar. Meanwhile, the author thinks China’s government interventions for controlling low exchange rate distorts the global economy.
Obviously, author thinks the currency interventions hurt the world economy, and make China an extreme example. However, I think author just want to use China’s exchange rate as an excuse for its dollar depreciation. Just like author said in this article “countries try to grab a bigger share of global demand at others’ expense”, so dollar depreciation definitely could hurt the world economy and other countries’ profits, but author may not consider this point. To the contrary, the value of Chinese domestic currency benefits lots of foreign companies that invest in China. (I have to admit currently China’s monetary policy and exchange rate is a hot topic in the world economy)
America could totally benefit from dollar depreciation, but global economy may bear more pressure because of this issue. A drastic fluctuation will be caused in the international financial market since dollar depreciated, as the sustaining depreciation of dollar and frequent fluctuations will increase the amount of trade in foreign exchange market and exchange rates will fluctuate frequently, and then cause foreign exchange market turbulent. On the other hand, there will be a change of value that between dollar-priced capital and other currencies-priced capital so that investors have to reevaluate asset value and rate of return, and then result in speculative trades increasing and disorderly movement of fund. Moreover, at present the dollar-denominated property that hold by foreign countries reach up to 5 trillion dollar, hence dollar depreciation will make a big loss for most countries.
Besides, America expect to Chinese yuan appreciation so that it could benefits from exports. Here is another good example to analysis China’s monetary policy: Japan’s economic recession after the “Plaza Accord”. 25 years ago Japan, America, France, German and UK united to guide dollar depreciation and Japanese yen appreciation through drafted “Plaza Accord” in order to solved America’s de deficits. The result of this issue is the famous Japan’s economic bubble 1990s. After this economic bubble busted, Japan’s economy was immersed in stagnant condition and continued more than ten years. Although Japan’s economic recession is not totally caused by rising domestic currency value, “Plaza Accord” is the main reason. Hence from the lesson of Japan, I think no country like to pay for the competitors’ fault by losing self-benefit.
Every country want to improve its own national competitiveness. American government may be very dissatisfied with China’s currency interventions policy, but this is a strategy for China to enhance her national competitiveness.
a href="http://www.economist.com/node/17093549">
Obviously, author thinks the currency interventions hurt the world economy, and make China an extreme example. However, I think author just want to use China’s exchange rate as an excuse for its dollar depreciation. Just like author said in this article “countries try to grab a bigger share of global demand at others’ expense”, so dollar depreciation definitely could hurt the world economy and other countries’ profits, but author may not consider this point. To the contrary, the value of Chinese domestic currency benefits lots of foreign companies that invest in China. (I have to admit currently China’s monetary policy and exchange rate is a hot topic in the world economy)
America could totally benefit from dollar depreciation, but global economy may bear more pressure because of this issue. A drastic fluctuation will be caused in the international financial market since dollar depreciated, as the sustaining depreciation of dollar and frequent fluctuations will increase the amount of trade in foreign exchange market and exchange rates will fluctuate frequently, and then cause foreign exchange market turbulent. On the other hand, there will be a change of value that between dollar-priced capital and other currencies-priced capital so that investors have to reevaluate asset value and rate of return, and then result in speculative trades increasing and disorderly movement of fund. Moreover, at present the dollar-denominated property that hold by foreign countries reach up to 5 trillion dollar, hence dollar depreciation will make a big loss for most countries.
Besides, America expect to Chinese yuan appreciation so that it could benefits from exports. Here is another good example to analysis China’s monetary policy: Japan’s economic recession after the “Plaza Accord”. 25 years ago Japan, America, France, German and UK united to guide dollar depreciation and Japanese yen appreciation through drafted “Plaza Accord” in order to solved America’s de deficits. The result of this issue is the famous Japan’s economic bubble 1990s. After this economic bubble busted, Japan’s economy was immersed in stagnant condition and continued more than ten years. Although Japan’s economic recession is not totally caused by rising domestic currency value, “Plaza Accord” is the main reason. Hence from the lesson of Japan, I think no country like to pay for the competitors’ fault by losing self-benefit.
Every country want to improve its own national competitiveness. American government may be very dissatisfied with China’s currency interventions policy, but this is a strategy for China to enhance her national competitiveness.
a href="http://www.economist.com/node/17093549">
Weakness of Euro institution
The debt crisis continues from one to the next in Europe, it makes the market worry about not only the Ireland financial distress, but also the euro institution. In recent days Irish debt crisis has been an international hot topic, some worries are about Ireland’s own economy and financial problem, but more are distrust of Euro zone and Europe succor institution, meanwhile this situation exposes the weakness of Euro institution.
The core of Ireland’s success is attract foreign direct investment through low tax rate and make herself a European bridgehead for global investment, and then improve the development of real estate and the other industries, I think this is a good national competitive strategy. Therefore, compare with debt crisis, the condition of aid (required Ireland increase tax rate) from EU is the most problem for Ireland government.
No matter what Greece debt crisis, Ireland debt crisis or Portugal, Spain and Italy debt problems are, the root is Euro institution’s own flaw: unified monetary policy with each country acts of its own free. After Greece debt crisis euro zone has done the first step for coordinating financial policy, but this is not enough to solve the problems that has existed a long period.
The core of Ireland’s success is attract foreign direct investment through low tax rate and make herself a European bridgehead for global investment, and then improve the development of real estate and the other industries, I think this is a good national competitive strategy. Therefore, compare with debt crisis, the condition of aid (required Ireland increase tax rate) from EU is the most problem for Ireland government.
No matter what Greece debt crisis, Ireland debt crisis or Portugal, Spain and Italy debt problems are, the root is Euro institution’s own flaw: unified monetary policy with each country acts of its own free. After Greece debt crisis euro zone has done the first step for coordinating financial policy, but this is not enough to solve the problems that has existed a long period.
Working better for today generation and future generation
Foreign companies that produced computers, computers parts and pharmaceuticals in Ireland dominated its overall economic growth. However, indigenous Irish growth was practically limited to services or at best to the software sector. Consequently, the degree of linkages between foreign and indigenous firms decrease rather than increase.
The Celtic Tiger, despite its increasing concentration in high - tech, it sectors was contracting in the most routine segments of those sectors, mainly, assembly of components, localisation of software or call - centre servicing. Thus , Celtic Tiger happened without any essential change in industrial strategy by Irish state and,because of the state little capacity for policy implementation, the firms expressed their innovative activities in their home countries. So that, the state's inability to induce linkages between them and indigenous firms meant that there was no internal system of innovation.
What should be in process of change ?
Most crucially, the state's low capacity to implement policy left it at the mercy of foreign investors (sector). The state should implement policies that encourage indigenous development. That is, implementation of policy of economic autonomy. Therefore the state should improve the return on investment by grants and other measures which lower the price of capital as well as by more general steps to enhance profitability such as low taxes. In this context, the state should encourage indigenous firms by general competitive sufficient in the Irish economic environment such as building enough infrastructure or low labour costs. Moreover, greater attention should be paid to management, innovation and marketing and, the task of developing indigenous firms might be as same as from that of attracting foreign investors.
Ireland growth remained exogenous determined and dependent. The state should improve productivity and terms of trade which enable the state to foster an expressed indigenous economy, and export orientation. In order to succeed, Ireland should make the right policy choices, have capacity to implement them without dispute with Eu and US.
Industrial development in Ireland should be continue based on taxes rates. Taxes breaks for exports and other incentives to industries.
The Education
As regards the supply of educated labour, a more vocational type of education might meet labour markets needs as well as a system producing largely educated young persons with the capacity and flexibility to be trained later specific skills. Economic development can be crucially affected by the education and the skills of the populations. Fund training should be directed only to upgrade skills. Introducing of MCA ( Master in Economics Administration) course in university should be a step for educating future managers in public administrations.
The free fees should be converted in loan. At this stage, income tax should be granted until end of loan repayment. The grand and registration fees should be awarded by depends on the income of the student,s family and other circumstances.
Institutions
Local authorities should have considerable administrative power rests in the hand of elected county mayor, instead of county manager. Democratically, county manager and councillors can be under directives elected county Mayor. Local taxes from local shop should be raised and spend local for maintaining infrastructure and local sense. A decentralisation office should be in implementation. For example, the state by hiring office centre for driving test provisionary in every county. These office centre will create job.
The Dail
Separate executive authorities and law makers. A TD become a minister, would be not allow to sit in Dail as a law maker. In this context, the Dail will become independent and the forum of accountability to the people. Abolition of expenses on TD constituency office. The Seanad accountability should be reinforced by voting their member through public election. The seanad is necessary to counteract any enact error should come from dail.
A ministers without dual mandate, at this stage, as first executive authority in his/her department will become neutral. Consequently, ministers accountability will be reinforced by their responsibility as the first executive authority in their department. In this context, a secretary general in a department will be able to work closely with his/her minister.
Note
The economic growth which deny Ireland under policy of economic autonomy, is closely connected to multinational investors. Consequently, economic growth in foreign investment in Ireland coincided with economic growth in the U. S economy.
The current economic crisis in Ireland showed that any continuation economic dependency on multinational investors can not be taken granted. It is a prerequisite for Ireland to trace the road map under policy of economy autonomy and renewal political institution as a step for working better for today generation and future generation.
The Celtic Tiger, despite its increasing concentration in high - tech, it sectors was contracting in the most routine segments of those sectors, mainly, assembly of components, localisation of software or call - centre servicing. Thus , Celtic Tiger happened without any essential change in industrial strategy by Irish state and,because of the state little capacity for policy implementation, the firms expressed their innovative activities in their home countries. So that, the state's inability to induce linkages between them and indigenous firms meant that there was no internal system of innovation.
What should be in process of change ?
Most crucially, the state's low capacity to implement policy left it at the mercy of foreign investors (sector). The state should implement policies that encourage indigenous development. That is, implementation of policy of economic autonomy. Therefore the state should improve the return on investment by grants and other measures which lower the price of capital as well as by more general steps to enhance profitability such as low taxes. In this context, the state should encourage indigenous firms by general competitive sufficient in the Irish economic environment such as building enough infrastructure or low labour costs. Moreover, greater attention should be paid to management, innovation and marketing and, the task of developing indigenous firms might be as same as from that of attracting foreign investors.
Ireland growth remained exogenous determined and dependent. The state should improve productivity and terms of trade which enable the state to foster an expressed indigenous economy, and export orientation. In order to succeed, Ireland should make the right policy choices, have capacity to implement them without dispute with Eu and US.
Industrial development in Ireland should be continue based on taxes rates. Taxes breaks for exports and other incentives to industries.
The Education
As regards the supply of educated labour, a more vocational type of education might meet labour markets needs as well as a system producing largely educated young persons with the capacity and flexibility to be trained later specific skills. Economic development can be crucially affected by the education and the skills of the populations. Fund training should be directed only to upgrade skills. Introducing of MCA ( Master in Economics Administration) course in university should be a step for educating future managers in public administrations.
The free fees should be converted in loan. At this stage, income tax should be granted until end of loan repayment. The grand and registration fees should be awarded by depends on the income of the student,s family and other circumstances.
Institutions
Local authorities should have considerable administrative power rests in the hand of elected county mayor, instead of county manager. Democratically, county manager and councillors can be under directives elected county Mayor. Local taxes from local shop should be raised and spend local for maintaining infrastructure and local sense. A decentralisation office should be in implementation. For example, the state by hiring office centre for driving test provisionary in every county. These office centre will create job.
The Dail
Separate executive authorities and law makers. A TD become a minister, would be not allow to sit in Dail as a law maker. In this context, the Dail will become independent and the forum of accountability to the people. Abolition of expenses on TD constituency office. The Seanad accountability should be reinforced by voting their member through public election. The seanad is necessary to counteract any enact error should come from dail.
A ministers without dual mandate, at this stage, as first executive authority in his/her department will become neutral. Consequently, ministers accountability will be reinforced by their responsibility as the first executive authority in their department. In this context, a secretary general in a department will be able to work closely with his/her minister.
Note
The economic growth which deny Ireland under policy of economic autonomy, is closely connected to multinational investors. Consequently, economic growth in foreign investment in Ireland coincided with economic growth in the U. S economy.
The current economic crisis in Ireland showed that any continuation economic dependency on multinational investors can not be taken granted. It is a prerequisite for Ireland to trace the road map under policy of economy autonomy and renewal political institution as a step for working better for today generation and future generation.
Friday, November 26, 2010
Is the Entertainment Sector Recession Proof?
The entertainment sector continues to show stable or increasing profits during recessionary periods. The Great Depression of the 1930’s is also known as The Golden Age of Hollywood. Why do so many people choose to increase their spending on entertainment during a recession?
According to Michael Brush, the entertainment sector is seen as a bright spot amid the economic downturn. Spending in the entertainment sector, specifically cinema ticket sales and gaming, tends to increase in difficult financial times. People want to escape the reality of the situation and focus on something other than the current dire situation. The decrease in income leads to replacement of ‘expensive’ pastimes by more affordable distractions. Trips to the cinema are a relatively cheap form of entertainment and this has led to a large increase in sales. Retail spending decreased by 10% in 2009, yet 10% more was spent in cinemas.
Movie releases are generating more profit now than ever. Cinema ticket sale records are constantly being broken. Avatar (2009) became the highest grossing film in the world with $2,781,505,847 worldwide box office total. Many movies are breaking records set pre recession. Toy Story 3 generated over a billion dollars in 2010 and is ranked as the fifth highest grossing film of all time by IMDb.
The entertainment sector will continue to grow in this time of recession as people flood to the cinemas. Six of the Top Ten Highest Grossing Films of all time were produced in or after 2007 showing the little effect the recession is having on this sector. With predicted high earners such as the final instalments of the Harry Potter & Twilight series’, and Batman: The Dark Knight Rises set for release in the next two years, this trend can only continue.
References:
http://www.imdb.com/boxoffice/alltimegross?region=world-wide
http://articles.moneycentral.msn.com/Investing/CompanyFocus/potter-and-spock-vs-the-recession.aspx
And now back to more pressing issues...
IMF, Brian Cowen, Budget cuts and General Elections... these are all issues which have dominated the Irish and global news over the past week or so. With this in mind would you spare me a minute as I return to more pressing matters, they are of course the financial state of Manchester United...
Last time I posted my blog, United were in the midst of relinguishing their hold on Wayne Rooney and seemingly cashing in on their prized asset in a bid to pay some of their mounting debt. Only one day after the blog was posted, Wayne Rooney had signed a new deal worth £180,000 a week. So what does this mean?? Are the Glazers about to loosen their purse strings and spend some cash on players? Or is this an investment and Rooney will meerly be sold in the summer for an exorbitant amount of cash??
On novermber 19th, a number of weeks after the Rooney debacle,the Glazer family announced they are to pay off £243.7 million Payment in Kind (PIK) debt, which is owed by Manchester United’s parent company Red Football Joint Venture (RFJV). The move, which reportedly will involve “money from outside the club”, will eliminate the PIK debt that carries a punitive interest rate of 16.25 per cent annually. PIK loans in leveraged buy-outs typically carry a substantially higher interest and fee burden than senior loans.So great news for all fans of Manchester United one may suspect...
The fallout of this move by the Glazers has almost left more unanswered questions than before. As the Glazers continue to refuse to address the public or the fans it is extremely difficult to retrieve these unanswered questions, the main one being... Where is the money coming from?? Bloomberg reported that the money for PIK repayment will not come from club sources, although no further details have emerged about how the family intends to afford the £243.7 million redemption costs. A Glazer family spokesperson did tell the BBC that the family has not sold any equity in the club to repay the debt, leaving refinancing by far the most likely option given the perilous state of the Americans’ US business empire.
So although this looks encouraging at first, it could likely mean that the Glazers have refinanced once again and may have plunged United into further debt.In fact it is entirely possible that The Glazers are using United owned assets as collateral. Old Trafford could still be sold and and United’s training base at Carrington transfered to a Glazer holding company under the terms of the January bond. Sale- and lease-back arrangements could net the family more than £400 million but forever burden the club with punitive rental costs. Nothing in today’s PIK refinancing suggests an asset-lock is – or ever will be – in place.
So, much mystery remains over the Americans ownership of Manchester United. Much like the Irish peoples relationship with our fair state, the loyal Manchester United supporters remain in the dark over the financial future of the club. On the bright side at least it will be Old Trafford being repossessed and not their homes, although for many this is just as terrifying a thought.
http://www.telegraph.co.uk/sport/football/teams/manchester-united/8138910/Glazers-repayment-of-220m-payment-in-kind-loans-at-Manchester-United-leaves-more-questions-than-answers.html
Last time I posted my blog, United were in the midst of relinguishing their hold on Wayne Rooney and seemingly cashing in on their prized asset in a bid to pay some of their mounting debt. Only one day after the blog was posted, Wayne Rooney had signed a new deal worth £180,000 a week. So what does this mean?? Are the Glazers about to loosen their purse strings and spend some cash on players? Or is this an investment and Rooney will meerly be sold in the summer for an exorbitant amount of cash??
On novermber 19th, a number of weeks after the Rooney debacle,the Glazer family announced they are to pay off £243.7 million Payment in Kind (PIK) debt, which is owed by Manchester United’s parent company Red Football Joint Venture (RFJV). The move, which reportedly will involve “money from outside the club”, will eliminate the PIK debt that carries a punitive interest rate of 16.25 per cent annually. PIK loans in leveraged buy-outs typically carry a substantially higher interest and fee burden than senior loans.So great news for all fans of Manchester United one may suspect...
The fallout of this move by the Glazers has almost left more unanswered questions than before. As the Glazers continue to refuse to address the public or the fans it is extremely difficult to retrieve these unanswered questions, the main one being... Where is the money coming from?? Bloomberg reported that the money for PIK repayment will not come from club sources, although no further details have emerged about how the family intends to afford the £243.7 million redemption costs. A Glazer family spokesperson did tell the BBC that the family has not sold any equity in the club to repay the debt, leaving refinancing by far the most likely option given the perilous state of the Americans’ US business empire.
So although this looks encouraging at first, it could likely mean that the Glazers have refinanced once again and may have plunged United into further debt.In fact it is entirely possible that The Glazers are using United owned assets as collateral. Old Trafford could still be sold and and United’s training base at Carrington transfered to a Glazer holding company under the terms of the January bond. Sale- and lease-back arrangements could net the family more than £400 million but forever burden the club with punitive rental costs. Nothing in today’s PIK refinancing suggests an asset-lock is – or ever will be – in place.
So, much mystery remains over the Americans ownership of Manchester United. Much like the Irish peoples relationship with our fair state, the loyal Manchester United supporters remain in the dark over the financial future of the club. On the bright side at least it will be Old Trafford being repossessed and not their homes, although for many this is just as terrifying a thought.
http://www.telegraph.co.uk/sport/football/teams/manchester-united/8138910/Glazers-repayment-of-220m-payment-in-kind-loans-at-Manchester-United-leaves-more-questions-than-answers.html
Thursday, November 25, 2010
The increasingly strange role of Unions!
Watching Jack O Connor on TV3 announcing the current budget as "a declaration of war on lower income people in the country who contributed least to the cause of the problems" usually would ring true for me looking at our current budget. However last night I had a curious reaction to Jack O Connors words especially as a person who broadly supports the role of social contract and trade unions. That reaction being that the ICTU's current actions are hypocritical to say the least.
Over the last few days numerous commentators, talking heads and aficionados from ICTU have been rolled out to attack the current budget for targeting the poorest and most vulnerable in our society and they in many ways are right. We have seen in the last a series of regressive taxs proposed, cuts to frontline services and other measures proposed which will proportionally effect the poor more drastically. Why then does ICTU's representations on the matter ring hollow?
About a year ago now there were a series of strikes and threatened industrial actions taken by the Unions in response to a perceived threat to public sector pay and pensions, the end of social partnership as we knew it. The government its wisdom decided to retain a semblance of normality and avoid prolonged industrial action so they say down with the unions and talk out a deal. A month later we had the much debated Croke Park agreement! Public sector pay was to be off limits in the cuts that are no doubt needed in exchange for concessions in terms of the structure of the public service.
So what has this got to do with the current budget? Ireland current government spending is about 54 billion in total( and our tax take about 32billion), just under 20 billion of this is on public sector pay and pensions or about 35%. The actions of the ICTU and the Croke park deal have cordoned off about 35% of our spending to be saved from any significant cuts (indeed top level public sector workers have taken proportionally very little of a hit) thus forcing any government to look elsewhere for savings bar some cost efficiencies.
Where then will the government look?
To capital spending(killing off jobs for labour intensive workers), to front line services, to the very people Jack O Connor claims a "declaration of war" is being announced on. Its a curious country where the role of Unions has resulted in the vulnerable in society being hit to save middle income earners - who are relatively very well payed compared to their British or European counterparts - from cuts which are no doubt necessary to find a more balanced fiscal situation for the country.
Maybe it is time for ICTU and the Unions to think about their own role in the "declaration of war" or indeed their role in the future of our society? It seems to me they have become a number one variable in marginalising the people they would no doubt claim to represent.
Monday, November 22, 2010
Single Currency is not only Ireland interest,it is alsoEuropean interest
According to Derek Scally in Berlin and Ruadhan Mac Cormaic in Dakar, French and German officials have contradicted the Government assertion that Ireland,s 12.5% corporation tax still on agenda in any negotiations over financial aid for Ireland. What this mean, That is to rise corporation tax in future. In my opinion, rising corporation tax in future will not surprise to me and I believe will happen. Why? First remember how this mess stated. According to The Irish Times dated on 22/11/2010
September 2008 ,The Government puts in place a bank guarantee to protect Irish banks. In October this is extended to subsidiaries of foreign banks operating here.
January 2009, the Government says recapitalisation is no longer appropriate to secure the viability of Anglo - Irish Bank and announces its nationalisation
December 2009, Following a harsh budget, Mr Lenihan says:"We have turned a coner...If w work together now and share the burden, we can deliver sustainable economic growth for all".
September 2010, Government discloses that total cost of anglo bailout will be 29.3 billion Euros and could rise to 33 billion Euros. Other banks bring the total to more than 50 billion Euros.
October 2010, Government proposes a four - year plan to reduce defficit by 15 billion Euros a year.
October 2010, Government announces that 6 billion Euros in cuts and taxes will be made in the December 7th budget.
November 14th 2010 ,Minister for Justice Dermot Ahern say reports of an imminent bailout from the IMF and the EU are "fiction", He adds"...absolutely nothing is taking place in respect of this".
November 16th the IMF announces it has agreed to take part in a joint IMF/EU visit to dublin
November 17th , Mr Cowen says the Government is working with "colleagues" on the "euro issue problems that are affecting Ireland.."
November 18, the IMF holds discussions with the Department of Finance and the Central Bank.
November 21, the government meets to approve formal request for assistance from the IMF and the EU.
The above chronological event explain that the current government never knew what right dicisions should be in place for Ireland economic crisis and, I believe that even new government in years ahead will not know the right cure for poor growth in todayIrish economy. They will also keep try until the EU give the new Government the ultimatum to rise corporation tax. They will rise corporation tax. However, in my opinion not corporation tax will fix Irish economy. It will fix itself from American and European economy growth. Thus Irish economy will fix itself from exports. Reduce social welfare, cut minimun wage and cut women tax 5% , these conditions from IMF are for to pay back IMF interest rates not incentives for future growth in Irish economy.
September 2008 ,The Government puts in place a bank guarantee to protect Irish banks. In October this is extended to subsidiaries of foreign banks operating here.
January 2009, the Government says recapitalisation is no longer appropriate to secure the viability of Anglo - Irish Bank and announces its nationalisation
December 2009, Following a harsh budget, Mr Lenihan says:"We have turned a coner...If w work together now and share the burden, we can deliver sustainable economic growth for all".
September 2010, Government discloses that total cost of anglo bailout will be 29.3 billion Euros and could rise to 33 billion Euros. Other banks bring the total to more than 50 billion Euros.
October 2010, Government proposes a four - year plan to reduce defficit by 15 billion Euros a year.
October 2010, Government announces that 6 billion Euros in cuts and taxes will be made in the December 7th budget.
November 14th 2010 ,Minister for Justice Dermot Ahern say reports of an imminent bailout from the IMF and the EU are "fiction", He adds"...absolutely nothing is taking place in respect of this".
November 16th the IMF announces it has agreed to take part in a joint IMF/EU visit to dublin
November 17th , Mr Cowen says the Government is working with "colleagues" on the "euro issue problems that are affecting Ireland.."
November 18, the IMF holds discussions with the Department of Finance and the Central Bank.
November 21, the government meets to approve formal request for assistance from the IMF and the EU.
The above chronological event explain that the current government never knew what right dicisions should be in place for Ireland economic crisis and, I believe that even new government in years ahead will not know the right cure for poor growth in todayIrish economy. They will also keep try until the EU give the new Government the ultimatum to rise corporation tax. They will rise corporation tax. However, in my opinion not corporation tax will fix Irish economy. It will fix itself from American and European economy growth. Thus Irish economy will fix itself from exports. Reduce social welfare, cut minimun wage and cut women tax 5% , these conditions from IMF are for to pay back IMF interest rates not incentives for future growth in Irish economy.
R.I.P. Ireland
The past week will be recorded in Irish history in many decades to come. We have been mislead and betrayed and are left worrying on the future outcomes. Our fate has been handed over to foreign leaders and the Irish are waiting in anticipation in changes they will make. I am starting to get annoyed with all the recent gloom in our country, everyone is stressing about "possible" changes that might not even be made. I'm all for preparing oneself for the future but i think it's got out of hand. It's like everyone thinks the IMF are going to ruin the country, when if you look at it they're here to fix the mistakes we made ourselves.
This morning the Green Party leader John Gormley, issued a statement on what they believe must be done in the coming two months to save any prosperity and independence of the Irish people. Among these are:
Not even 24 hours later, the Green Party leader, announced to Brian Cowen, that they were pulling out of the government. After all their talk about how we can get through the tough times ahead, "I believe we can get out of this situation. We must all work together to ensure the best outcome for everyone," they jump ship when we need them the most.
http://www.irishtimes.com/newspaper/breaking/2010/1122/breaking23.html
This morning the Green Party leader John Gormley, issued a statement on what they believe must be done in the coming two months to save any prosperity and independence of the Irish people. Among these are:
- Prove we can make our budget balance by 2014
- Deliver a budget by 2011
- Secure funding support from the EU and IMF which respects Irish interests and restore stability to the Euro area.
Not even 24 hours later, the Green Party leader, announced to Brian Cowen, that they were pulling out of the government. After all their talk about how we can get through the tough times ahead, "I believe we can get out of this situation. We must all work together to ensure the best outcome for everyone," they jump ship when we need them the most.
http://www.irishtimes.com/newspaper/breaking/2010/1122/breaking23.html
Saturday, November 20, 2010
It is Not a bailout, it is a Loan on basis of 5%
What was private discussions between EU/IMF and Irish Government about last cure for poor growth into Irish economy has become today public discussions . The discussions were/are about how the Irish € 15 billions four - years economic plan could be realised. At first stage, the Irish Government plan has gone through about eight drafts gives details of budgets and what cuts will be made and how will be achieved. In this discussions, the Government has insisted to retain the 12.5% corporation tax. Subsequently, a delegation from the American Chamber of Commerce in Ireland were assured by Irish Financial Officials that there would be no charge in the rate.
At the second stage, the European authorities and the IMF are working on the basis that they will receive a call for emergency aid from the Government after Government realised the plan.
At the finally stage, a separate plan for restructuring the banking sector is also expected to be finalised. Moreover, the Government will sign of on the 160 page document which explain how the state will reduce the €5 billions at the end of 2014. At this stage the Government work hard to avoid increase the €5 billions target in talks on the loan bailout so-called facility.
However, the Government will be unable to stop increasing cuts over the next four - years plan. Why? Despite that Ireland economic downturn cannot be considered as same as Greece economic downturn, Greece should be considered as an example to meet terms of EU/IMF bailout. Euro zone finance Ministers called Athnes on 16 November to cut state spending further to meet the fiscal targets agreed as part of its €10 billions bailout package. The new cuts are bigger than the initially planned €.2 billion deficit reduction targeted in last month's first budget draft. " We have not yet won the battle but we are in a better position to deal with the real problems ... a wasteful state, problematic state companies and tax evasion", said finance Minister George Papaconstatinou. From Greece experience, this explain that it is hard to confirm that over the next four - years Irish economy will be in good shape and subsequently it will no further cuts. I think that since Irish economy growth have a base into one location, that is a dependence on growth export, the further cuts will go ahead. Subsequently, I think that there is no other alternatives today than EU/IMF. Since cuts is Not enough , EU/IMF is a last cure for poor growth into irish economy.
At the second stage, the European authorities and the IMF are working on the basis that they will receive a call for emergency aid from the Government after Government realised the plan.
At the finally stage, a separate plan for restructuring the banking sector is also expected to be finalised. Moreover, the Government will sign of on the 160 page document which explain how the state will reduce the €5 billions at the end of 2014. At this stage the Government work hard to avoid increase the €5 billions target in talks on the loan bailout so-called facility.
However, the Government will be unable to stop increasing cuts over the next four - years plan. Why? Despite that Ireland economic downturn cannot be considered as same as Greece economic downturn, Greece should be considered as an example to meet terms of EU/IMF bailout. Euro zone finance Ministers called Athnes on 16 November to cut state spending further to meet the fiscal targets agreed as part of its €10 billions bailout package. The new cuts are bigger than the initially planned €.2 billion deficit reduction targeted in last month's first budget draft. " We have not yet won the battle but we are in a better position to deal with the real problems ... a wasteful state, problematic state companies and tax evasion", said finance Minister George Papaconstatinou. From Greece experience, this explain that it is hard to confirm that over the next four - years Irish economy will be in good shape and subsequently it will no further cuts. I think that since Irish economy growth have a base into one location, that is a dependence on growth export, the further cuts will go ahead. Subsequently, I think that there is no other alternatives today than EU/IMF. Since cuts is Not enough , EU/IMF is a last cure for poor growth into irish economy.
Monday, November 15, 2010
Opportunities in a bailout!
Read a very interesting article today in Constantin Gurdgiev's "True Economics" blog on the possibilities that come with a EFSF bailout for Ireland. The most salient point being that Ireland's problems are "despite what we are being told by our policymakers, ...... structural".
There seems to be a broad consensus that public sector spending in the country is out of control and our tax system is not working and remains dependent on a model based on high consumption and far too reliant on the wrong kinds of tax's for this moment on time. The problem is though, what do we do about it? The political will is not there to deal with any of our major structural problems in a real and robust way, from social welfare from public sector pay.There is no doubt a lot of issues which need to be addressed and a lot of people who genuinely do not feel as if they can take any more cuts but the fact remains there is a real need for restructuring of how our state operates.
Gurdgiev argues that despite the obvious reasons for fear an EFSF bailout and the strings attached would bring the rigours of IMF/ECB examination down on Ireland and that this would be no bad thing. Infact he argues a bailout would provide access to a cheaper, more solid line of credit with which to finance the country and it would afford us an opportunity to overcome our political impotence by essentially getting some lesser involved higher powers to face us with the stark choices we need to make on a new direction for the country.
With the rising uncertainty since our Dept of Finances announcement that their figures were not up to scratch, rising costs of borrowing, changes of tone from Germany as concerns bond holders and especially in the face of our own inability to deal with the task in hand it is for me a fairly convincing argument but maybe thats just the sound of desperation from a citizen who's lost faith in the countries decision making classes ability to provide the leadership that is so obviously needed.
Monday, November 8, 2010
The Irish Economy? This blogger hasn't a clue.
It's a sad day when you have to admit that you haven't a clue about your favourite drunken topic. Mine is: "the Irish Economy: how we got into it, how we're getting out". QED. But today I realise this is just beyond me. In this, I'm totally clueless.
Irish government bonds traded at over 8% today (8th November) and at a 5.5% point premium over the German bund. This is truly shocking and incredibly serious for a country that is running a budget deficit of €19bn and faces a bank bailout of around €50bn, all of which needs to be financed on the international bond markets. (Well, not all of the bank bailout money will be borrowed, the investment into AIB and BoI coming from the National Pension Reserve Fund.) If this yield does not come down (significantly) then it's curtains for Ireland as a sovereign economy; we will have to be bailed-out by the European Commission/ECB and the International Monetary Fund.
It doesn't look as if the bond yield is going anywhere but up for the moment. So why is this and what can we do about it? (Seeing as, ya know, we're a sovereign economy an' all.) And why are our bonds trading at 8%? Well... that's the part I'm trying to figure out for myself.
1. In my last blog (Austerity Ireland) I mentioned Colm McCarthy; he says it's the €19bn deficit. And we're going to sort that out in the budget, so that's ok. We'll survive. Phew.
2. Then I read Morgan Kelly's piece in today's Irish Times. Kelly's analysis of the Irish banking boom and bust in the past few years has probably been the most precinct of anyone; so he's a serious guy. His analysis today of the current situation is staggering:
Irish government bonds traded at over 8% today (8th November) and at a 5.5% point premium over the German bund. This is truly shocking and incredibly serious for a country that is running a budget deficit of €19bn and faces a bank bailout of around €50bn, all of which needs to be financed on the international bond markets. (Well, not all of the bank bailout money will be borrowed, the investment into AIB and BoI coming from the National Pension Reserve Fund.) If this yield does not come down (significantly) then it's curtains for Ireland as a sovereign economy; we will have to be bailed-out by the European Commission/ECB and the International Monetary Fund.
It doesn't look as if the bond yield is going anywhere but up for the moment. So why is this and what can we do about it? (Seeing as, ya know, we're a sovereign economy an' all.) And why are our bonds trading at 8%? Well... that's the part I'm trying to figure out for myself.
1. In my last blog (Austerity Ireland) I mentioned Colm McCarthy; he says it's the €19bn deficit. And we're going to sort that out in the budget, so that's ok. We'll survive. Phew.
2. Then I read Morgan Kelly's piece in today's Irish Times. Kelly's analysis of the Irish banking boom and bust in the past few years has probably been the most precinct of anyone; so he's a serious guy. His analysis today of the current situation is staggering:
- The economy is already past the moment of no return. That occurred in September of this year when €55bn of Irish bank bonds were repaid, mostly from borrowings from the ECB. This was our last chance to relieve the Irish state of the bad debts of our financial institutions by implementing a debt for equity exchange with the bondholders.
- The real cost of the bank bailout will be €70bn, not €50bn as the government says. This is because the full extent of AIB and Bank of Ireland's bad property loans have to be faced up to.
- This means we are insolvent, with our liabilities outweighing our assets. Although, for the moment we're still liquid, with enough cash to keep us going until the summer. The ECB support to our banks in September also kicked the moment of reckoning down the path.
- The next (and final) stage of our financial crisis (collapse, really) is the looming wave of mortgage defaults (hundreds of thousands according to Kelly) that will finish off the Irish banks and, by way of the government guarantee, the Irish economy.
- This will force the ECB to stop quietly propping up the Irish banks and economy, acknowledge that we're bust and give us the bill to be repaid. If the interest rate demanded in the bail-out is too high, well.... we're right in it then.
- Kelly closes his article by saying he has no solution to this problem, that we now depend "on the kindness of strangers."
3. Then getting home I had a look at the Examiner (8th November, pg.13), which had an article from Tom O'Connor on my favourite drunken topic. He reckons the 8% bond yields are down to the governments failure to stimulate the economy. This, to me, seems to have ignored the simple fact that we're up to our necks in debt and need more of it. "Ah, nothing that a stimulus can't fix!"
All this, in particular the Kelly article, had my head spinning. Is it the banks? The deficit? The lack of stimulus? All? Some? None? For what its worth I reckon it the combination of the cost of the bank bailout and the deficit. (I don't think the bond market are particularly worried about a stimulus, especially since they are going to be the ones to pay for it. And it could be nothing more than a punt, seeing as Ireland is such an open economy and households are in such debt.)
As for a way out of this mess... Not a clue.
Wednesday, November 3, 2010
The free college tuition is not solution to all children wish to pursuit studies in college
In a paper published by UCD's Geary Institute, Dr Kevin Denny said the key factor to influence college entry was Leaving Cert points. He found that few children from working - class backgrounds secured enough points to gain a place in most university courses. Moreover, DR Denny's research found that children with fathers from the professional class gained an average of 90 CAO points more than those whose fathers are manual workers. In this context, last year,the report of a Higher Education Authority found that lower socio - economic groups such as manual workers, semi - skilled or unskilled workers, were still under - represented in courses like medicine, pharmacy and law. Record show that in 2008 - 2009, no children came from an unskilled background were recorded in medicine or pharmacy courses. By contrast, 50 percent of medical students and over one - third of law students come from profesionals backgrounds. Thus, the children of both higher professionals and lower professionals ( for example, teachers and are still over -represented at third level and also children of farmers are well represented. However, those from from poorer backgrounds are still considerable under represented ( The Irish Times, November 3,2010).
It is clear that these report show that the free college tuition has no solution to all children wish to pursuit studies in college. From this context, however, no free college tuition and suggestion of loan to those from poorer backgrounds are also not a solution to all children wish to pursuit studies in college. The problem still there. Free frees not free accommodation and free college text book....
To bring back college tuition should be based on comprehensive reason such as that the government failed to finance college not on basis of number from poorer backgrounds who were entered in college. Bring back college tuition is less solution for funding the college. But it is not solution to all children wish to pursuit studies in college. If government failed to fund the free college tuition, it will be impossible to fund loan for students from poorer backgrounds.
It is clear that these report show that the free college tuition has no solution to all children wish to pursuit studies in college. From this context, however, no free college tuition and suggestion of loan to those from poorer backgrounds are also not a solution to all children wish to pursuit studies in college. The problem still there. Free frees not free accommodation and free college text book....
To bring back college tuition should be based on comprehensive reason such as that the government failed to finance college not on basis of number from poorer backgrounds who were entered in college. Bring back college tuition is less solution for funding the college. But it is not solution to all children wish to pursuit studies in college. If government failed to fund the free college tuition, it will be impossible to fund loan for students from poorer backgrounds.
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