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No group sheltered in the four-year plan? Hmmmm…. November 25, 2010

Posted by WorldbyStorm in Economy, Irish Politics.
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…I’ll get back to that in a moment. Let’s start with the news that:

The Government’s prospects of getting the budget through the Dáil eased last night when it emerged that Independent TDs Jackie Healy-Rae and Michael Lowry are likely to support it.

With the backing of the two Independents the Government would have a potential 82 supporters while the Opposition will have a potential maximum of 80 if Pearse Doherty is elected as Sinn Féin TD for Donegal South West tomorrow.

Ain’t that something? All the careful dances of Monday and Tuesday resulting in a return to the status quo ante. More or less. How this plays with their constituents is an interesting question. Perhaps more interesting is what happens when the detail of the Budget is released, because to believe that the Four-Year Plan and that are one and the same might be a political error of some dimensions, and those of us with long memories will remember how smallish details like shoes once sank a Government. Though admittedly that’s a bit academic at this stage.

But sorry, yeah, ‘no group sheltered’? Well, not quite.

The IT lead story has the heading: Welfare and pensions hardest hit in €15bn package of cuts and taxes

And Stephen Collins agrees/admits… that:

The four-year plan will affect everybody in society but the impact will not be the same across all groups.

The unemployed and low- and middle-income earners will probably be affected most in terms of a significant reduction in their standard of living. One group will be hit through cuts in welfare payments, while the other will have to endure extra taxation.

And what about the banks, the nominal reason all this has kicked off, the reason that unemployed, low and middle-income earners are having to be ‘affected most’ (by the way, interesting to see yet another front opened against the public sector, who from the articles it seems to be believed don’t pay taxes and haven’t had systemic wage cuts)? Philip Lane makes a most reasonable point in his summary of the plan…

The pre-announcement of future spending and tax plans should reduce fiscal uncertainty but its silence on the banks is a glaring omission

And the view from abroad?

And the markets?

Analysts questioned whether the plan was credible. Stephen Lewis, chief economist at Monument Securities, said: “It doesn’t seem all that realistic to me. It seems they’re planning very stringent fiscal measures and yet they expect the economy to grow against that background. That seems highly unlikely.”

There’s gratitude for you, but why should this surprise us?

You might think that having put much social provision to the sword, promised to impose cuts rather than tax increases and had an EU-IMF programme foisted upon it that the ratings agencies might find the Republic of Ireland a safer bet today than yesterday, or the day before.

Not a bit of it. We’re worse again! And why would that be? Our ‘bloated public sector’, perhaps?

Er… no.

Ireland’s short-term and long-term credit rating has been downgraded by the ratings agency Standard & Poor in response to the greater than expected cost of recapitalising the banks.
In a statement issued this morning, the agency cut Ireland’s long-term sovereign rating to A from AA-, and the short-term grade was lowered to A-1 from A-1+.

And they’re holding fire on whether to lower us again…

Standard & Poor’s said Ireland’s rating may be lowered again if negotiations over the International Monetary Fund-European Union program or the December budget fail to ease a funding crunch.
The agency said it has also viewing short- and long-term ratings negatively, meaning a further downgrade is likely.

What’s most telling about this is that we are told that the reasons for the actions taken on the socio-economic front are to placate the markets.

Problem is that they don’t appear to be placatable.

Now, of course, this is more than in small part a function of the reality that far from being an issue with ‘our bloated public sector’ what is fundamentally taking place here is a crisis of the euro zone, with Portugal and Spain next in line. And after that? Erm… Belgium apparently.

So there’s a very real aspect of this which means that whatever we, or indeed the EU-IMF does, will have marginal effects upon the situation. And if that seems to be illogical and unreasonable, well so it is.

Speaking of those markets, isn’t this helpful? Isn’t it? No? What more do they want?

Mohamed El-Erian, chief investment officer of the powerful bond manager Pimco, fuelled anxiety about the health of the banks yesterday by describing Ireland’s banks as “bleeding deposits”.

He said: “What you advise your sister in Ireland now is that you’d say take your money out of an Irish bank and put it in another bank headquartered elsewhere.

“That’s what happened in Argentina and in emerging economies. People worry about their savings.”
Ireland’s central bank had immediately denounced Erian’s remarks by saying there was “no basis for concern” and all deposits were guaranteed by the government. But the central bank’s admission that major international firms had been withdrawing their funds from Ireland highlighted the anxious mood of the markets on the eve of the government’s four-year fiscal plan, which is a crucial component on the deal with the IMF and EU.

Erian, who was interviewed by the Bloomberg news agency, said Ireland needed to conclude those negotiations to restore confidence in the banking system.

“It will seriously undermine the prosperity of this country for a generation. The first thing they must do is execute on what they announced this weekend, which is a big external aid package and steps by the Irish government,” he said.

No, no it’s not.

Comments»

1. CL - November 25, 2010

The ‘big external aid package’ will add a further 80bn euro to govt. indebtedness pushing the debt/gnp ratio above 100%. Depending on the interest rate insolvency and sovereign default looms.
Meanwhile at the Irish Times,
‘Another eyebrow-raiser from last night statements was that the bailout funding would be exclusively European. No IMF money would be involved..’ Dan O’Brien.(IT,Nov.22)Does the economics editor of the IT really believe there is no IMF money involved?

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dmfod - November 26, 2010

I think this may actually mean something in the sense that according to Michael Noonan the other night the IMF are actually proposing slightly less ruinous stuff for us at the moment and they are currently having a row with the EU who want to bomb us back to the stone age with the terms and interest rates – despite all we did for them with Lisbon – sob! So basically the EU are fucking us too much for the IMF.

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2. Pope Epopt - November 25, 2010

As a friend of mine wise-cracked:

“Lenin had five year plans, we have a four year plan. That’s the cutbacks!”

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3. ejh - November 25, 2010

Lenin had five year plans

No he didn’t

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Pope Epopt - November 25, 2010

Thanks for the correction. Stalin sounds even better.

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Dr. X - November 25, 2010

It was Hitler who had a four-year plan, overseen by Hermann ‘Meyer’ Goering.

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4. Lost in the maelstrom « deshocks - November 25, 2010

[…] No group sheltered in the four-year plan? Hmmmm…. (cedarlounge.wordpress.com) […]

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