Proposals to Improve Competitiveness

According to an article by Ann Cahill that appeared in the Irish Examiner on February 26th 2011, a list of proposals have been drawn up to improve the competitiveness of countries. Cahill writes that "Proposals that would see wage increases linked to productivity and to incomes of other trading partners are expected to land on the desks of the EU's 27 prime ministers over the weekend."

The proposals, which have been drawn up by Jose Manuel Barroso and Herman Von Rompuy in consultation with EU states includes issues such as a minimum rate for corporation tax, increasing retirement age as well as examining pensions. The reduction of interest rates for Ireland and Greece will also be discussed.

The proposals will be set as voluntary targets and it is up to individual countries wheter or not to accept these. According to the article "there will be no sanctions imposed on countries that do not meet the targets but the proposal will suggest that naming and shaming by their peers should be a sufficient incentive to improve performance." The proposals have been made following demands by Germany and France for EU countries to reduce debt and improve growth.

However, one has to wonder if these measures will improve growth in Ireland. During the Crltic Tiger Ireland experienced increased growth. Much of this growth was accredited to a low corporation tax. Any increase in the minimum rate of corporation tax will surely be a set-back for Ireland, as the 12.5% rate has traditionally been a factor which has helped to attract Foreign Direct Investment into the country.

The proposals will be discussed by eurozone leaders on March 11th and only time will tell if they will be accepted by Ireland and other EU countries.

http://www.irishexaminer.com/business/plan-to-link-wages-across-eu-states-146555.html

Environmental problems and Sustainable development

Since the industrial revolution, economic globalization has caused the earth ecosystem reach to the limits rapidly, and global trade liberalization has aggravated global ecological crisis. Sustainable development was born on “tying together concern for the carrying capacity of natural systems with the social challenges facing humanity”. "The idea of sustainable development grew from numerous environmental movements in earlier decades. Summits such as the Earth Summit in Rio, Brazil, 1992, were major international meetings to bring sustainable development to the mainstream".

Economic globalization improved global productivity and offered developing countries a rare chance to develop economy. Various states involved in the economic globalization system which is leaded by capitalism. The malign competition between countries and enterprises greatly destroyed global ecological, because under the pressure of competition, the limitation of natural resources and the value of natural ecosystems are ignored. Deforesting of big range to plant cash crop to increase export, give up the traditional farming method to make more efficiency, and building large transportation network to make agriculture products into market faster, such of these things created large cost for society and environment, as well as destroyed agricultural biodiversity and ecosystem. Lots of economists think that in developing countries there is a linkage between economic growth that caused by agricultural products trade expansion and environmental deterioration. Moreover, economic globalization strengthens economic correlation and interdependency between countries. A country’s environment pollution may be transboundary movement and harm global environment.

Rapid forest decrease, global warming and acid rain, such environmental problems are the result caused by human asked for natural incontinently. The natural resource exhaustion and energy crisis severely restricted economic development, and then negatively influence societal economic sustainable development.

“The goal of sustainable development is to enable all people throughout the world to satisfy their basic needs and enjoy a better quality of life without compromising the quality of life of future generations”. So development indicator is not only depending on GDP but also on society, economy, culture, and environment and so on. “Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment”.

Hard Times Come Again Once More

An article in today’s Wall Street Journal portrays a different side to the doom and gloom of government debt and political instability in Ireland. Don Duncan gives an inside scope on the families around Ireland and what they are experiencing in terms of the prospect of emigration.

Duncan examines how the cure for recessions has been emigration and how this is going to affect the general election in Ireland. He explains that thousands have joined in a new wave of emigration, this has been unrivaled in two decades with “65,300 leaving the country in 2010” (Kelly, A. IrishCentral.com). I think tragically, as if history is repeating itself, Ireland is in an economic collapse and is likely to sink even further during the rest of this decade “We just seem to be incapable of governing ourselves” resulting in a 62 year husband and wife (Lynch’s) bound for Australia. The article gives a concise account of the emigration flows of Ireland in the past three decades, however it is stated that this generation are the most educated resulting in brain drain.
It is the case that we the people of Ireland “symbolize Ireland's economic crisis than the re-emergence of large-scale emigration”. History shows that this happened after the famine as well as the1950’s and 1980’s, where in 1989 44,000 people left while currently the CSO predicts that 100,000 people will emigrate over the next two years, more than twice the number that left in 2009 and 2010. That comes to about 1,000 per week. Duncan later quotes John McHale (economist at NUI Galway) and the “fiscal feedback loop” and how tax hikes, cuts in education, health care as well as austerity measures and higher unemployment could increase the incentive to leave. McHale concludes that our skilled workforce and knowledge based economy provide our competitive advantage “If the most enterprising people leave, you undermine that advantage."
In all this talk about the economic welfare of the nation I feel this article show the massive effect emigration has on the mindset of a nation. Brothers, sisters, sons and daughters are leaving their homes. Houses have been left unoccupied after the property boom but now homes are vacant. The reflection of “the Irish countryside been littered with abandoned houses, and parishes struggled to muster full football teams” in the 1950’s, to the tearful reunions at Dublin Airport as smartly-dressed sons and daughters came back home for the Christmas holidays. "I remember thinking—I hope to God my kids don't end up leaving like that. A quarter century later, Mr. Lynch's children are doing just that. How as a nation can we restore confidence when the close Irish society is been torn apart by emigration. Why trust our system when “Our economic miracles are always of such short duration”. "We just can't seem to have a sustainable economy."

Oil Price Soar

As the future of Libya hangs in the balance, the faith of the countries oil fields is a major concern worldwide. Dictator Gadhafi may be ordering sabotage attacks on oil pipelines leading to the Mediterranean Sea. Libya is the latest nation to be rocked by protests by the ouster of Tunisia's president last month. Gadhafi's refusement in stepping down from his 41 year ruling has caused the recent up rise against him. Libya having the largest oil reserves in Africa, the ninth-largest producer among the OPEC members, pumping 1.6 million barrels a day of oil, is a huge cause for concern as it has resulted in a dramatic increase in crude oil prices.

Oil prices are now the highest in nearly 30 months, as the recent revolt in Libya has reduced supplies from Africa's third biggest producer. Brent crude oil prices has rose to an estimated $114 a barrel, and caused Libya to lose up to two-thirds of their oil output, as much as 1 million barrels of Libya's daily oil production. Goldman Sachs estimated disruptions at 500,000 barrels a day. Libya's high quality output of crude oil is being significantly impacted due to the exodus of personnel.

According to the Head of Asian commodities reseach, Soozhana Choi, "The events in Libya and North Africa have brought geopolitical risk back onto the radar,.., how much higher can prices go really depends on the spread of protests in the region.

Worrying is that rising oil prices have a tumbling affect on the the overall consumer price index (CPI) directly by raising its energy cost component. This includes the prices of energy-related items, such as household fuels, motor fuels, gas, and electricity. Among these, gasoline and fuel oil are directly derived from crude oil, so their prices follow oil prices very closely. An increase in the price of oil may also affect energy costs through the prices of other items that are close substitutes; for example, households and businesses may switch from oil-related energy items to natural gas, thus leading to an increase in its price. The extent to which rising oil prices translate into higher overall inflation through higher energy costs depends on their persistence. If they continue to rise, they may lead to sustained increases in the overall price level, that is, to an increase in the overall inflation rate.

To default or not to default? That is the question...

Pic: NiallOLoughlin.com


“Just because some people choose to buy fast cars doesn’t mean every single one of us is somehow culpable" argued Áine Hartigan at the annual Irish Times Debate last Friday evening. Hartigan was arguing in favour of Ireland defaulting on the IMF imposed sovereign debt. Those arguing in favour of defaulting on the debt have taken the line that it’s unfair to burden the youth now and of future generations with debt which has been accrued by many irresponsible and incompetent people whom have escaped scot free with their pensions intact.

On the other side of the coin there are those who feel we deserve what we are getting and need to knuckle down and deal with it. Speaking at the Irish Times debate, one debater arguing against defaulting said “we need to take the EU-IMF-shaped aspirin and grow up as a nation”. This is an argument which is difficult to support, as not defaulting may mean crippling the Irish economy for many years to come in order to continually service the mounting interest. Leader of Sein Fein Gerry Adams echoed this sentiment recently stating that “the ECB has a lot of money in Ireland, but that’s its problem,” he said. “We are far better dealing with this on our terms . . . acting in our common good rather than a crisis coming down the line which will just swamp everybody.”

Although not the most economically astute politician, Adams may well be right here, and if Ireland are looking for a precedent than we need look no further than Argentina. In the 1990’s the South American country suffered a major economic crisis which resulted in the country being plunged into recession at the start of the millennium. Argentina received major financial assistance similar to Ireland, from countries such as Spain, Italy and France. Eventually the Argentineans defaulted on the sovereign debt of almost $95 Billion. A number of difficult years followed with Argentina being shut out of financial markets, but now in 2010 the country is stable and has a renegotiated debt package which is easier to manage.

So should we take our medicine and honour our debt, or should we stick it to the IMF and refuse to suffer for the Euro’s stability? Ireland has to pay interest on the loans being negotiated at a rate which exceeds the rate at which the economy grows over the next few years. This will make the country’s situation worse, not better. We have no option but to default and/or leave the eurozone. In any case most of us will probably be on a beach in Oz so take it with a pinch of salt!!

http://www.irishtimes.com/newspaper/ireland/2011/0223/1224290628869.html
http://www.irishtimes.com/newspaper/ireland/2011/0221/1224290426814.html

Judgement

Kenny refuses to take part in TV3 debate chaired by Vincent Browne. MR Kenny said his decision was based on remarks made by Browne last year about suicide. TV3 said it was disappointed by Fine Gael's decision not to participate in a first general election debate dated on 8 February 2011, which have to go ahead without Mr Kenny.
A spokesman said Browne had made a full and immediate apology for his remarks about suicide, which the station believed has been accepted by Fine Gael at the time ( see The Irish Times dated on February 5,2011)
I think that the decision taken by Fine Gael Leader is not better for Irish people and Irish Voters. As Mr Kenny wish to be the next Taoisearch, Vincent Browne remarks should not be an argument to refuse to participate in first debate with other political party Leaders. The decision for Fine Gael Leader could be considered as self-interests not for interests for Irish people and Irish voters.
In time for general election campaigns, among of the job of Irish Journalists is to help Irish people to understand issues and, to show them a Leader who can give answers to their problems they live with. Vincent Browne is one of Irish Journalists experienced into Irish political issues. If Browne is a foreign journalist, it could be no wrong for Kenny to refuse to take part in debate chaired by Browne. However, since Browne is an Irish Journalist I think that the decision taken by Fine Gael Leader is wrong. As he wish to be the next Taoisearch, he will stand for all Irish people including Vincent Browne.
Stand for Country is to work for everyone without prejudice. That is interests for public. If one feel that is impossible, it is better to stand for his/her own self-interests where one can find self-choices.

Sovereign debt restructuring: an IMF persepctive

I wanted to quote a speech from the IMF's first deputy managing director Anne O Kreuger notably section V:

"Let me now conclude. Unsustainable debts have to be restructured, one way or the other. The only question is at what cost. Adam Smith wrote that "when it becomes necessary for a state to declare itself bankrupt ... a fair, open and avowed bankruptcy is always the measure which is both least dishonorable to the debtor, and least hurtful to the creditor."

A more orderly process will be to almost everyone's benefit. The fact is that both the debtor country and its creditors stand to gain from a restructuring of unsustainable debts before the country has exhausted its reserves and condemned itself to a deeper economic downturn than necessary. At present, the threat of a disorderly workout means that the value of creditor claims falls more sharply on the secondary market when a country gets into trouble than it would likely do in a more predictable environment. A framework that allows creditors to preserve better the value of their claims and debtors to minimize output losses during the restructuring period helps both creditors and debtors. I have no doubt that they will increasingly come around to that view."

It seems the ECB are on course to continue trying to protect their reputation by attempting to justify policies which are obviously failing. Further cuts may be sensible routes to lower debt to GDP ratios in an accounting sense but in an economic sense their knock on effects might lead to a worsening of the situation and no doubt there is no question of borrowing for a stimulus to help out grow our debts.

A Sovereign Debt Restructuring programme would no doubt come with serious pain for all involved but maybe it is time we (and the EU/ECB) changed tack and accepted we may not be able to pay off our debts in full. Mr's Kreuger's advice on "unsustainable debts" could be our only route in the not too distant future.