Commission on Taxation presents its Proposals

Ireland's Commission on Taxation has proposed an annual tax on all residential property, water charges and the taxing of child benefit.

The report, which has been published in Dublin today, is part of the Irish government's strategy to shore-up the public finances, with the budget deficit likely to exceed € 20 billion this year.

With Ireland facing its worst financial crisis ever, the government is under huge pressure to restore the public finances.
Step one was the McCarthy Report, which recommended extensive spending cuts across the public sector, and step two is the list of recommendations from the Commission on Taxation.

The commission states that its priority is "to broaden the tax base, rather than merely increasing tax rates".

Commission chairman Frank Daly says the recommendations would "not damage economic growth". All recommendations were "designed to spread the burden of taxation more evenly and to give the government more certainty about its tax revenue".

The report urges the government to focus on raising revenue through property taxes, spending taxes and income taxes - in that order.
The commission also identified 245 tax relieving measures in the Irish tax system.

The main proposals are:

• An annual property tax on all residential property, excluding social and local authority housing.
• Child benefit should be a taxable income, with a tax credit to offset the increase in tax for low income earners.
• A new three-rate income tax system should be introduced to replace the current high and low income tax rates.
• The health levy should be abolished and integrated into the income tax system when fiscal conditions improve.
• Rules on residency and tax exemption should be strengthened.
• Stamp duty on ATM, credit and debit cards should be phased out in the interest of promoting a cash-free society.
• Removal of tax relief for nursing home expenses once the 'Fair Deal' scheme ends.
• The current 'Cinderella clause' needs to be supplemented with additional tests and criteria.
• Additional capital gains tax should apply on windfall gains from property rezoning.
• Domestic water charges should be phased in, with incentives to install meters and with a waiver for low income households.
• Carbon tax based in tonnes of carbon should be introduced and collected at the earliest point of supply.
• VRT should be replaced over ten years by a system based on car usage.
• Tax relief for pension payments should be replaced with a scheme 'along the lines of the former SSIA scheme'.
• The first € 200,000 of pension lump sums should be tax-free, with the remainder taxed at standard rate.
• Ireland's low corporate tax rate should remain in place to support economic activity long term.
• The artists' tax exemption should end.
• Expenses of Oireachtas members should be treated in the same way as expenses paid to all other employees, with a limit placed on the dual abode allowance and an end to the flat rate of relief for accommodation.
• End stock relief for farming business, but continue relief on farm land leasing.
• Income tax relief for trade union subscriptions should be ended.

As these are so far only recommendations, it will be interesting to see which of the proposals the government will adopt, and in which way they will be implemented.

Outlook for Aer Lingus is "highly uncertain" as the Company reports increasing Losses

The management of Ireland's national 'flag carrier' Aer Lingus says that "the outlook for the airline is highly uncertain" in light of the latest financial results. Their losses have tripled to now € 93 million in the first half of this year.

After taxes the net loss in the first six months of 2009 more than tripled to now € 73.9 million (compared with a net loss of € 21.6 million for the same period of last year), while revenues were down over 12% on the back of lower passenger fares and cargo fees.

In a company statement Aer Lingus said that it is "not in a position to give guidance for the full year at this time".

The company also announced that it can no longer afford to pay what is described as 'legacy-style' rates to its staff.

Aer Lingus' Chief Financial Officer Sean Coyle stated that the company's board has "a tough job, but believes the airline can be made successful as an independent entity as it undertakes an exhaustive and wide-ranging examination of its operations and commercial focus".

This is nice boardroom lingo, the new language big companies and their representatives use these days to confuse the rest of us, the normal people who speak proper English.

But what does it actually mean?

"Clearly we can't sustain operating losses of these levels, we can't sustain the kind of cash burn we've had in the first half of the year, and we need to rebase our cost structure to live with the lower fares that our passengers are prepared to pay," Sean Coyle explained in a second attempt.

Well, this is a lot clearer, although I still wonder what it means "to rebase our cost structure"...

Perhaps it means just to spend less money, and maybe Aer Lingus should start doing that from the top down. Their directors are still overpaid, and even more so in light of the now revealed disastrous company results.

No bank is prepared to lend money to an airline that is burning about € 400 million of net cash in a 12-month period. Not even the Irish banks that brought us the 'credit crunch', recession and national finance crisis.

"We have to come up with a cost plan to stabilise our position. Nothing is ruled out at this time," Sean Coyle emphasised.

I wonder if he and his fellow directors have thought of reducing the number of their flights and aeroplanes, to match an obviously shrinking market. The idea that anyone can fly to anywhere for next to nothing and for no particular reason is ludicrous. It ruins the rest of the ozon layer that is left by now, and does further damage to our planet.

Education has to do its part to bring the message home, and governments - not only the Irish - have to play their part as well, first of all by imposing normal fuel taxation on aircraft fuel, which is still - and for no good reason - tax-free.

Too many people still fly to too many destinations, for no real reason. Holidays can be spent in one's own country as well as abroad, and if someone really feels the need to go to other countries, we still have very good and reliable ferry services.

The financial crisis of Aer Lingus is only the tip of the proverbial iceberg. It shows that airlines and air travel as most people know them are no longer viable and sustainable. I have seen this a long time ago and not used any airline or commercial flight for more than 20 years.
It is time now for everyone to wake up, see the light and accept reality.

If we allow ourselves - and the airlines - to stay in cloud-cuckoo-land, the crash that will happen in due course will be at least of the same dimension as the recent collapse of the banks.

Good Morning, Ireland! Good Morning, World!

The Emerald Islander

Ireland's Government is crumbling at the Edges

Since both Houses of the Oireachtas (Ireland's parliament) are on their long summer holidays, August is usually a month with few political news and events. However, as we are in the deepest economic and political crisis since the foundation of the State, the political matters have not gone away this year as they normally do when Leinster House is empty for months.

There are too many dark clouds hanging over Ireland at present, and in particular over the current government, which is slowly but steadily crumbling at the edges of its coalition.

Only recently two Fianna Fáil backbench TDs resigned the 'party whip', which means that they are no longer members of FF's parliamentary party group. They did not (yet) go as far as their former colleague Joe Behan from Wicklow, who left Fianna Fáil for good last year and now sits as an independent TD. But they might well follow Behan if things are getting any worse.
And there are more Fianna Fáil backbenchers who feel increasingly isolated and uncomfortable in their party. It only needs a few more of them to have the courage and guts to leave, and the government will be without a majority.

And there is of course the always present 'Green factor'. Ever since the Green Party made its fatal decision to join Fianna Fáil in a government coalition two years ago, a significant minority of party members are very unhappy with their leadership.
Many have meanwhile left the Green Party altogether, while others - like Brendan McCann, who was the Green candidate in Waterford in several local and general elections - remain nominally party members, but have gone into political hibernation.

In the recent local government elections the Green Party was almost wiped out completely and lost most of their previously 18 local councillors, while one of their former councillors - Nessa Childers - was elected to the European Parliament for the Labour Party on the same day.

So it is no surprise that the mood in the Green Party is pretty foul at present, and even within their small parliamentary group (of six TDs and two unelected Senators) there is a constant rumbling and grumbling, combined with great uncertainty where to go from here and how to proceed.

The government's plan to establish a National Asset Management Agency (NAMA) is the most controversial subject at present, and Taoiseach Brian Cowen is facing renewed pressure from the Green Party over it.
To make things worse for the Fianna Fáil leader, Mattie McGrath, one of his backbenchers from Co. Tipperary, has expressed strong doubts about NAMA as well.

Senator Dan Boyle (left), the chairman of the Green Party, has again warned that his party's support for the NAMA legislation "cannot be taken for granted".
In an interview with RTÉ News, Senator Boyle said that the Greens had "an internal process to complete" and that their members would ultimately make the decision.

This is the grass roots democracy for which the Green Party has been rightly famous over the past 25 years. But much of its actual people power has evaporated since many key people who opposed the Green's participation in government have left the party. It will be interesting to see in which direction the remaining Green Party grass roots will turn when they vote on NAMA.

In recent days, both Taoiseach Brian Cowen and Minister for Finance Brian Lenihan have expressed strong confidence that the Greens will back their NAMA legislation, if not outright then perhaps with some amendments. But I would not put a bet on that, if I were a betting man.

Meanwhile another Fianna Fáil backbench TD came out of the proverbial woodwork and said he would "require many more assurances from the Minister for Finance" before he could vote in favour of the proposed NAMA legislation.

Mattie McGrath (right), Fianna Fáil TD for Tipperary-South, stated that he has received "a huge amount of calls from people worried about the NAMA legislation". Some of them, he said, were "demanding a referendum on the NAMA plan".

This would not be a bad idea, and if adopted by the government, a NAMA referendum could easily be held together with the second referendum on the Lisbon Treaty on October 2nd.

"It appears that a few hundred bankers have brought the country to its knees, and that the tax payer will have to pick up the bill," Deputy McGrath said, demanding that "the minister [for Finance] must provide detailed assurances to TDs at the Fianna Fáil parliamentary party meeting in Athlone next month".

Mattie McGrath, who was elected in 2007 for the first time and is therefore a 'new face' in the Dáil, added that he could "not trust the Department of Finance", given its record in dealing with the banking crisis to date.

Such clear and open words from a Fianna Fáil TD are rare, and very welcome. They show that not everyone in Fianna Fáil has lost the plot, and that there are still some government politicians with a portion of common sense left intact.

The question is how many of them are there, will their number be large enough to make a difference, and will they have the courage to stand firm, even if it could mean bringing down the government.
Should they do that, indeed, coming generations of Irish people will remember them fondly, and most of the Irish people alive would be most grateful.

Perhaps the Greens will beat the unhappy Fianna Fáil backbenchers to the post and pull the political emergency break. They will be punished by the voters for their support of Fianna Fáil anyway, if they stay in government or walk out. But if they could see their mistake of 2007 and have the guts to admit it, they might have a chance to survive as a party and - over some years - regroup and regrow again. (If they stick to Brian Cowen and Fianna Fáil until the bitter end, the Greens will most likely join the PDs as a sad footnote in political history.)

As much as the parliamentary holiday period is usually regarded as 'quiet', it is full of tensions and possibilities this year. Watch this space, and stay informed.
The Irish government is crumbling, and its days are numbered. I predict that it will not last until 2012, when the next regular general election is due to happen.

There are various elements that could end Brian Cowen's rule, from the Greens walking out to a backbench revolt in his own party.
And we should not forget the second referendum on the Lisbon Treaty. If the people of Ireland have the courage to follow their hearts, minds and conviction and say 'No' to Lisbon for a second time (on October 2nd), the government could collapse like a house of cards.

This would be the best thing that could happen to Ireland, and the first real step on the way out of recession and crisis.

The Emerald Islander

Main Dublin Railway Line collapsed

We are in a very deep recession, financial crisis and governed by the most ludicrous bunch of incompetents that has ever been assembled in an Irish cabinet. They have no clue how to get us out of the mess they created, waste time with their senseless waffling and procrastination, and in the meantime dream up ever more and higher taxes and severe cuts to the social welfare and education budgets, thus making the poor pay for the mistakes of the rich.

And while the government fiddles, all around it Ireland crumbles and falls to pieces.

The latest example - and indeed a most visible and symbolic one - is the sudden collapse of a segment of rail track in the northern part of Dublin.

Yesterday evening, at around 6.20 pm, a 20-metre-long section of the main Dublin to Belfast railway line on the viaduct across the Broadmeadow estuary - between Malahide and Donabate, just north of Malahide station - has crumbled and collapsed into the water.

The damaged line was noticed by the driver of the 6.07 pm train travelling from Balbriggan to Pearse station. He drove his train to Malahide station and reported what he had seen. There were about 50 people on the train, but no one was injured.

After the driver's report all other trains were immediately stopped from using the line.

Iarnród Éireann (Ireland's state-owned national railway company) has said that the collapse had "the potential to be a serious tragedy" and that they will be investigating the incident fully.

According to Iarnród Éireann, "the railway lines are inspected regularly and viaducts have a maintenance regime". But, as with almost everything here in Ireland, things are often not done right, not often enough, and not thoroughly.

There will be shuttle bus services between Drogheda and Skerries for northern commuter services for the foreseeable time.

The Emerald Islander

Small and medium-size Businesses in Danger

Two thirds of small and medium sized businesses in Ireland are under threat due to the current economic crisis, a new survey suggests.

The data has just been published by the Irish Small & Medium Enterprises Association (ISME), and the business trends analysis suggests that smaller companies are facing higher reductions in employment, investment and sales.

Over 600 companies responded to the survey, and 66% said that the viability of their business will be "under threat over the next twelve months" if present conditions remain. The current business environment was described as "poor" or "very poor" by 74% of the enterprises, up from 69% in the previous quarter.

Main concern at present is the ongoing economic uncertainty.

Almost half of the companies surveyed blamed the Irish government for the economic crisis, while 31% said the financial institutions (banks) were primarily at fault.

“The latest survey figures confirm that even though smaller businesses are usually more optimistic, there is little evidence of green shoots in the sector. In fact the second quarter has proven to be more difficult than the first quarter with a noticeable deterioration in sales, employment and investment,” says Jim Curran (left), the Head of Research at ISME.

The report suggests - he added - that Ireland's small businesses are continuing to downsize, with many companies planning to reduce employment numbers and investment levels further over the next number of months.

Commenting on the report, Cork TD Deirdre Clune (right), who is Fine Gael's spokesperson on Innovation, said: “Ireland cannot tax its way out of recession, but can only trade its way out of recession. Exports and the SME sector will play a crucial role in that process.”

Well said, but - as always - friendly words do not solve problems.

All stands or falls with the government and its will and ability to make the right decisions. As long as the present Irish government is in office, there is no hope whatsoever.

A change of government - most likely to a coalition of Fine Gael and Labour Party - might offer some improvements, but I doubt that it would solve all the problems.

That can only be done if the government - regardless which party or parties form(s) it - has the will to apply major changes to our political, social and economic system.
After the serious damage inflicted on the 'traditional capitalist system' by its main players and participants, making repairs will not be enough. What we need is a completely fresh start.

I can see that small and medium-sized enterprises in Ireland and around the world are willing and ready for that.
But the reluctance of governments and most political parties is a huge obstacle. I am looking forward to the next report from ISME and wonder if we will have a chance to recover, or if the unholy alliance of Catholic Church, Fianna Fáil and greedy bankers have destroyed us for good...

The Emerald Islander

Highest Unemployment Rate ever - now 11.8%

The number of people on the Live Register (of the unemployed) has passed the 400,000 mark for the first time last month.

On a seasonally adjusted basis, there are now 402,100 people in the Republic of Ireland seeking unemployment benefit or allowances.

It is the first time the numbers on the dole have ever reached this level and translates into an unemployment rate of 11.8%.

More than 105,000 people were added to the Live Register in the first five months of 2009.

Earlier this year, the Economic & Social Research Institute (ESRI) in Dublin forecast that unemployment could even rise to 17% next year.

The Irish Congress of Trade Unions (ICTU) says that the figures are "an indictment of failed government policies" and has called for "an immediate allocation of one billion Euros to protect and create jobs".

As much as that would help to stimulate the Irish economy, it is most unlikely to see our government spending any extra money at this time, as the Exchequer has just announced a budget deficit of currently € 10.6 billion (see my entry of June 3rd).

Shopping as it should be

Being a single man, living with a cat as my only companion, I do all the cooking and household chores that many other men have done for them by a woman. But I am not complaining. In fact, I like cooking and see it as one of the creative arts.

I also like to go shopping for groceries, which has of course to come before I can start cooking. And unlike many women I see in the supermarkets each week, filling their trolleys thoughtless and senseless with piles of expensive and unhealthy items of processed food, I am a discerning and selective shopper. I am also very price-conscious, a trait I have inherited from my mother.

So when I go shopping, I always look out for bargains or special offers, and in general I seek good value for my money. This does not mean that I always buy the cheapest items. Good value for money means getting quality for a fair price. As Ireland is quite an expensive country, with most things costing about twice as much as they cost in most other EU countries, it is worth to shop around.

Over the years I have developed personal shopping habits, buying a range of particular items in various shops, depending on quality and price. For my normal weekly grocery shopping I usually frequent three different local supermarkets (two Irish-owned and one foreign) and one small Polish shop that has opened here a few months ago and stocks certain continental delicacies one would not find in Irish shops or supermarkets.

One of the Irish supermarkets I use regularly is SuperValu, a chain of franchised stores under the umbrella of the Cork-based Musgrave Group. It is located in a small shopping centre, only a short walk from my house, and offers a wide range of quality food at fair prices.
The same also applies to the other two supermarkets I frequent, so I always decide carefully what I buy in one or in the others.

What makes SuperValu stand out from their competitors in recent weeks and months is their pro-active response to our current recession.

For the past nine months the Irish economy has not only seen a massive downturn in the wake of the global financial crisis, it has actually crashed and created widespread economic stagnation and the highest rate of unemployment this country has seen for decades.
Our current government, which is chiefly responsible for the terrible mess we are in, has no idea how to lead us out of it again. Facing a huge budget deficit - due to a drastic fall in tax revenue - Finance Minister Brian Lenihan just raises taxes all over the place and imposes extra levies on all those who still have a job. This gives him some extra money on the short-term, but it means of course that most people in Ireland have now less money in their pockets.
Subsequently everyone is tightening the proverbial belt and tries to spend less. And this has of course a direct and significant impact on all Irish shops and businesses.

People still need to eat, to wash their clothes and to clean their houses, but supermarkets and shops feel already the pinch of the nation's reduced spending power.
Some grocery shops just carry on as usual, hoping that people might still buy their products at the normal prices and make their personal spending cuts elsewhere. But the major supermarket chains are beginning to wake up and present their customers with ever more bargains and special offers.

This is a very welcome development and can only be further encouraged.

And though all supermarkets are making efforts now to retain their regular customers and gain new ones as well, the one that stands out from the rest and truly deserves a special mention is SuperValu.

Like most supermarkets, they always have - and had for years - special offers and promotions, usually on a weekly basis. But now SuperValu is going even a step further and offers special deals I have not seen anywhere else.
They actually give away certain food items for free, usually in very lucrative combination offers that are particularly suitable for families.

In recent weeks they offered nice cuts of Irish round roast (beef) at half of the normal price, and for every piece of meat one bought, one got either a small bag of potatoes, a bag of carrots, or a net of onions thrown in free of charge.

This is - in my humble opinion - the right attitude towards loyal customers and a proper and sensible reaction to the current recession and the general shortage of money in people's pockets. Or, to say it with SuperValu's own motto: Shopping as it should be.

When I went there yesterday and saw the week's specials, my heart actually leapt in joy. There were large bags of Irish apples and punnets with clementines, strawberries and blueberries on offer, and all of them for just € 1 each! There were also some other items available for the great price of € 1, including a pound of butter, a large bag of potato crisps (which I don't eat, although they are very popular in Ireland) and a litre block of vanilla ice cream.

I bought plenty of the fruit and went home with a heavy bag, but had actually spent less money than I would normally spend on a Friday. And I think that such commendable action by an Irish retailer deserves to be mentioned to the readers of this weblog.

I also obtained a brochure with special offers for next week, and they are again very attractive, but too many to mention them all here. However, let me tell you that they include sirloin steaks at half of the normal price, with a bag of chips thrown in free of charge for every purchase. So, if you want to treat yourself to a traditional Irish dinner of steak & chips, next week (May 25th - 30th) is the time to go shopping at SuperValu.

The Emerald Islander


P.S. To avoid any misunderstandings, I should mention here that I received no payment or compensation in kind for the article above. I wrote the piece because I think that in hard times, when money is tight and everyone is trying to make ends meet, one should know who cares for the needs of the nation. And when I see good deeds done, I like to share them with my readers, in the same way as I will always expose those who are trying to exploit or overcharge us.

A Nation of Debtors and Fools

Today the Central Bank of Ireland has stated that "the number of people in personal debt is growing rapidly", and that this is being "driven by mortgage borrowings".

At an Oireachtas Committee meeting in Leinster House this morning John Kelly, the Head of Statistics at the Central Bank, declared that "the number of people in debt in Ireland is rising faster than in any other Eurozone country".

According to Mr. Kelly "the number of people in mortgage debt is three times higher in Ireland, compared to other countries in the Eurozone". He also said that the large number of mortgage holders on variable or tracker rates is positive.

Separately, the number of people presenting themselves at the offices of the Money Advice Budgeting Service (MABS) has increased substantially since 2006.
Ann Marie O'Connor of MABS told the Oireachtas Committee that the amount of debt people are in who attend the service is also increasing. She said that her organisation was also concerned about the tactics of some debt collection agencies.

Mary O'Dea from the Irish Financial Services Regulatory Authority said a code was now in place to offer some protection for people in mortgage arrears. But this code was criticised as not going far enough by the representatives from the Free Legal Advice Centre.

What does all this information tell us?

Well, it presents us - the people of Ireland - with the blunt and uncomfortable truth that we (or at least the majority of us) have been living well beyond our means during the years of the false economic boom dubbed the 'Celtic Tiger', which was - as we now know - nothing but an artificial bubble, created by irresponsible politicians and greedy bankers, property developers, builders and estate agents.

As much as our collective anger is now directed at these people (and with all justification), we have to accept the fact that most of us were not innocent victims of the greedy buggers in suits. The vast majority of Irish people was only too willing to go along, up the metaphorical garden path, leaving all common sense and responsible behaviour behind.
We were carried away by the idea that we - little and long-suffering Ireland that was always poor and exploited by others - had now at long last found the legendary pot of gold at the end of the rainbow. We were rich, really rich, we thought.
And instead of being happy with that and building a nice nest egg for an even better future, we fell collectively for the many temptations a bunch of criminals and gamblers put in front of us.

People on modest incomes, who had been happy living in a normal house, driving a normal car and going on holiday once a year, felt 'entitled' to have a lot more. So they bought a bigger house, or even two. Some even acquired an additional apartment abroad, in places like Spain, Portugal or even Bulgaria. The latter is a country without proper political structures and widely controlled by the local version of the Mafia, a group of gangs recruited mostly from the former Communist security service (Bulgaria's version of the KGB).
How on Earth would anyone even think of buying property in such a place?!

But Irish people did. Quite a lot of them, in fact. They also 'needed' a new and much larger car, preferably one of the most polluting and environmentally unfriendly four-wheel-drives known here by their American name SUV (Sports Utility Vehicle).
And not enough with that, they also had to go on exotic foreign holidays several times a year, and to keep up with the Jones' also on additional luxurious 'city breaks' to various continental places over the weekends.
And if there was not enough money in the bank to pay for all this, then they used their various credit cards. The bank would always offer more loans, new cards and many 'lucrative refinancing packages' if someone got really strapped for cash.

There is an old saying that a fool and his money are easily parted. Ireland is the living proof that this phrase is still correct.
It gives me no pleasure to say this, but the Irish have now been exposed to the whole world as a careless and feckless wannabee nation, made up of irresponsible and greedy fools, gangsters, fraudsters and drunken yahoos.

Some of us - for example David McWilliams, George Lee, a few other people with common sense and even yours truly - warned of the consequences of the financial madness and wrote page after page and column after column, but to no avail.
We were called "spoilsports", "party poopers" and "eternal pessimists" by the punch-drunk financial criminals, and completely ignored by most of the 'ordinary' people.

And even now, that the metaphorical cat is well out of the bag, there are thousands of fools in this country who cannot or will not see and accept reality. Unfortunately this group is led by our government, the worst bunch of wasters and incompetents ever assembled in the history of the state. And since ignorance still rules the roost, things will get much worse throughout this year, next year, and perhaps for many more years to come.

There is only one way Ireland can regain strength and stability: We need a new government, urgently, and a reform of our political and electoral system. Everything else will follow from that. As long as we keep the current lot and our completely broken 19th century system in place, nothing we do and no remedy we offer the economy will be of any use.

The Emerald Islander

Latest Poll shows Fianna Fáil in Melt-Down

Every month the Red C polling organisation produces a nationwide political poll for the Sunday Business Post, Ireland's leading economical weekly.
The latest of these polls, published in today's edition of the paper, must make grim reading for the Irish government and especially for its majority party Fianna Fáil.

Being in power (with support from the Progressive Democrats and - since 2007 - the Green Party) since her rather surprising election win in 1997, Fianna Fáil enjoyed an unprecedented decade of widespread public support, riding on the wave of the unexpected economic boom known commonly as the 'Celtic Tiger'.
This boom was - as we now know - nothing but an artificial bubble, created by a relaxed and incompetent government, irresponsible banking, criminal speculations and a mad drive to build ever more houses and apartments without having a real demand for them.
When the bubble eventually burst last year, we found ourselves close to national bankruptcy and the unbelievable incompetence of both our government and our banks was exposed for everyone to see.

Although unrelated, the burst of the bubble happened shortly after the Irish electorate defeated the government - and all opposition parties except Sinn Féin - by rejecting the Lisbon Treaty.

Bertie Ahern, who was Taoiseach (Prime Minister) since 1997 and must surely have known only too well what was coming down the political and economical road, had jumped ship just in time to leave his successor (and previously deputy) Brian Cowen in complete charge of the developing political crisis and financial melt-down.

Ever since the once high popularity of Fianna Fáil has been in freefall. The government's 2009 Budget - brought forward to October 2008 - did further damage to the party, and the various forced additions to it made things even worse. The latest - the 'supplementary' or 'emergency' Budget presented by Finance Minister Brian Lenihan less than three weeks ago - seems to have delivered the final devastating blow to Fianna Fáil and its political future.

Today's Red C poll shows the party in complete melt-down, with only 23% of the electorate still supporting the faltering Fianna Fáil, whose incompetence and arrogance are creating ever more and ever widespread anger in all sections of the Irish population. This is the lowest rating of public support for Fianna Fáil in the party's history.

Not surprisingly the biggest winner is Fine Gael, Ireland's largest opposition party, which has been on the rise since last Autumn and gained a further two points this month, bringing it to an unprecedented 33%, ten percentage points ahead of Fianna Fáil.

The Labour Party, second-largest force in opposition and the potential coalition partner for Fine Gael, also improved her rising support by another two points to now 19%. This is clearly a reaction to the excellent parliamentary performance of party leader Eamon Gilmore and his deputy (and spokesperson on Finance) Joan Burton.

The Green Party, in coalition with Fianna Fáil since 2007 and facing internal opposition from a growing group of its traditional members and supporters ever since, seems so far unscaved by the government's massive unpopularity and remains unchanged on 7%. But this figure could be deceptive. The party has no chance to win a seat in the European election in June, and it is more than doubtful that it can perform well in the Local Government elections held on the same day. In recent months the Greens have lost two of their most prominent local councillors, and in some constituencies their previous candidates have decided not to stand for the party this year.

Sinn Féin, the smallest of the three opposition parties in parliament, gained one point in this month's poll and now stands on 8%, moving slightly ahead of the Green Party. It is perhaps a surprise that Ireland's oldest political party (and the only one active in the North as well as in the Republic) is not receiving more public support in the wake of the Fianna Fáil melt-down. There are several reasons for this, but the most significant is that - despite its now totally peaceful and democratic approach and its leading participation in the power-sharing government in the North - Sinn Féin is still not making inroads into Ireland's middle classes. This could change if the party can win stronger support from younger people, especially the growing student population, which is so far still predominantly non-political and more interested in 'fun' and an easy life. Increasing hardship and the expected re-introduction of fees for third-level education could change that.

The group listed in the Red C poll as 'Independents and others', which includes a number of smaller parties without parliamentary representation, remains - again - unchanged on 10% of public support. It is not clear if the poll has taken into account a number of newly formed groups, many of which have nominated candidates for the Local Government elections in June. They are so far a widely unknown quantity, but could attract a significant percentage of protest votes.

For the first time the poll features the new pan-european party Libertas, which emerged out of the prominent Anti-Lisbon campaign group with the same name and intends to have candidates for the European Parliament in all 27 member states of the EU. The poll registers so far only 2% of public support for Libertas in Ireland, which seems a very low figure, given the strong and effective campaign the organisation mounted in their successful defeat of the Lisbon Treaty.
But it is not unusual that polling organisations need a certain amount of time to assess the true strength of new parties.

Based on today's figures one can however be certain that Fianna Fáil will suffer serious losses in both the European and Local Government elections on June 5th. There is also no doubt that the two up-coming Dublin by-elections for the Dail will not produce any new Fianna Fáil TD.

Depending on the severity of their losses in June, Fianna Fáil could well face a leadership crisis or even an internal rebellion during the summer. The position of Brian Cowen, who was elected as party leader and Taoiseach without contest last May, is far from secure now. There is still the traditional and rather stubborn loyalty to a leader for which Fianna Fáil has always been known, but ever since the (now independent) Wicklow TD Joe Behan left the party last year, there is a slowly but steadily widening crack developing between the cabinet and the backbenches.
An even wider gap exists now between most Fianna Fáil politicians and the people of Ireland, and the future of our main government party is very bleak, to put it mildly.

The Emerald Islander

€ 10 Billion Rescue Programme for Irish Banks

The Irish government has announced its support for a massive recapitalisation programme of up to € 10 billion for some of the most battered credit institutions in the country.

A statement from the Department of Finance says that its objective is "to ensure the long-term sustainability of the banking sector in Ireland".
The government will support the programme "alongside existing shareholders and private investors", and it will "underpin its contribution through the availability of credit to individuals and businesses in the real economy".

That sounds rather positive and gives some hope for the Irish economy, which is not only in recession, but also mismanaged by an bunch of third-rate people whos - meanwhile only too obvious - incompetence is only matched and even outshon by their self-serving arrogance and greed.

After long meetings with bank executives the Minister for Finance Brian Lenihan (left) confirmed that money from the National Pensions Reserve Fund will be used for the new recapitalisation programme.
State investment will take the form of preference and/or ordinary shares in the institutions receiving funds, which means in fact a part-nationalisation of our major banks.

Lenihan said that State investment would be "assessed on a case-by-case basis" and all the institutions in question were being asked to submit their proposals by early next month.

A spokesperson for the Allied Irish Bank (AIB) said that the bank's board would "discuss the government announcement" when it meets later this week.

There has also been a special Cabinet meeting today, in addition to the regular meeting on Tuesday.

The Irish Business & Employers' Confederation (IBEC) has welcomed the announcement on recapitalisation.
The group's Director General Turlough O'Sullivan (right) said that "the banking sector is vital to the effective functioning of business and the economy generally".

And he is right, of course. But there remains the so far unmentioned large elephant in the room, whom neither the government not IBEC seems willing to tackle.
I am talking about the people who are fully responsible for the crisis, the chief executives and board members of the banks and building societies, who created the huge financial bubble and then let it burst without any concern for their own institutions or the nation as a whole.

If these people remain in their well remunarated - in my opion highly overpaid - positions, we can as well take the € 10 billion to the cliffs of Moher and throw them into the sea. Everyone can see the dimensions of the crisis now, and everyone agrees that only drastic measures will make a difference, save the banks and restart the economy. But it will only mean throwing in a lot of good money after plenty of bad debts if the creators of the problem are allowed to stay in charge.

The Minister for Finance must insist on the resignation of the entire boards and the chief executives of the failing banks. And should they refuse to do so, he must use his authority and remove them by force.
Only with such a clean sweep of the boards the way will be free for new and inspired leadership that can do things differently and give us hope to come out of the crisis in a reasonable time frame.

We need also to remember that the € 10 billion now offered by Brian Lenihan come from the National Pensions Reserve Fund, which is limited in seize and supposed to guarantee our future pensions. This is not money we can freely and easily use for speculations and gambling.
Only two weeks ago it emerged that there could be a deficit of between € 20 and € 30 billion in our pension system (see my entry of November 30th), which is not yet fully investigated. If we now give € 10 billion of pensions money to the banks as recapitalisation fund, we need to be sure that this money will come back - and hopefully with interest and some profit - and not be lost like the many billions the banks and their incompetent executives squandered in recent years.

Only a radical change in management and policy can secure that. No matter how much of our money the government will pump into the financial institutions, it will only do them some good if the lost confidence in the banks is restored.
With all the old duffers who were either too greedy, too ruthless or too incompetent (and in some cases all three combined) staying in their cosy jobs, there cannot be any confidence-building.

One of the main elements of the crisis is that banks are now refusing to give loans to each other.
Have you ever wondered why? Well, the answer is simple enough: Because they don't trust each other. The people who run our financial system make a relatively small group, and they all know each other only too well. And since they don't trust each other any longer - and for very good reason - it is clear that they have to go. How can the government and the general public have confidence into bankers who are no longer trusted by their peers?

Money is only one element of banking. The second - and way more important - is trust. And that is worth a lot more than € 10 billion, it is in fact priceless. I urge Brian Lenihan not to forget this and to make sure that our money is only injected into the banks after they have cleaned up their management structure.

The Emerald Islander

Speculations fly high after Lenihan's Bank Talks

Bank of Ireland has today confirmed that it has been "approached by a number of parties interested in investing in the bank".

This news comes after reports that a major consolidation of Irish banks has emerged as a possible solution to the current crisis.

Last night RTÉ News reported that talks between Minister for Finance Brian Lenihan and bank chiefs had led to the possibility of a radical overhaul of the Irish bank system. (see also yesterday's entry on this subject)
This led to speculations about what shape this would take, and whether foreign or private equity investors would be involved.

Bank of Ireland shares, which had already climbed this morning, were up almost 25% at € 1.26 just after the statement.

Meanwhile the Group Chief Executive of Allied Irish Bank (AIB) has declined to comment at all on the situation.
Arriving at a posh function in Dublin, Eugene Sheehy (right) said that "shareholders read what they read, but we [the bankers] have no comment to make".
It is really mind-boggling how smug and arrogant Sheehy still is, after having lost 95% of his company's value since he took charge of it in 2005 and having to go now to the State and to us - the taxpayers - cap in hand...

Asked if he could see a situation where there would be only two large banks operating in the Irish market, he responded that was speculation.
Which, of course, it is, cooked up by some financial journalists in Dublin who pretend they can read the mind of Brian Lenihan.

Yesterday's talks involved a series of meetings at Farmleigh (the government's official 'guest house' in the Phoenix Park in Dublin) between Lenihan and senior executives from the financial institutions covered under the State guarantee scheme. (see yesterday's entry)

Since the guarantee was given in September, the Minister for Finance has the power to force mergers between financial institutions. This is one of the concessions the troubled banks had to make before the State was willing to cover them.

After the meetings some participants 'believed only Bank of Ireland and AIB would remain after the shake-up', but there has been no comment on the content of the meetings.

Brian Lenihan (left) said that yesterday's meetings were "focused on ensuring there would be adequate credit for Irish businesses".

The suggestion of a major wave of consolidation would also have to be linked with fresh capital for the banks.

There is, however, still no clear picture of how a final deal would be put together, or how long it would take.

I suggest that the nervous crowd of Dublin's financial journalists stop speculating and second-guessing other people, shut their laptops for a couple of days, relax and have a few pints. As the pressure of the world markets weighs heavily on our banks, Brian Lenihan will have to come up with a solution soon. He knows that, the banks know it, and we all know it.

And when he has made his decision - which is his, and his alone by the power of his office - then we can start analysing and commentating. I hope Lenihan will do a better job with the banks than he has done with the 2009 Budget. And personally I also hope that we will in the end have more than just two banks left in this country. I have never trusted the Bank of Ireland, nor the AIB, and never was a customer of theirs. And if these two - as some people suggest - would remain alone in the field of financial services, we all would be forced to do business with them. I would not feel comfortable with that at all.

In fact, mergers and amalgamations that create ever larger banks are in my opinion not the answer to the current financial crisis. The larger a bank is, the more dominant and arrogant it tends to be, and the more it will also be enticed to participate in the massive internatinal gambling that brought all the big western banks into the trouble they - and subsequently we all - are in now.

I would go in the opposite direction and break up the largest banks and create a number of new small regional banks, whose regulations would limit them to traditional banking activities and ban them from participating in the international speculation and gambling operations. They should be staffed by local people and have an actively positive approach towards small and medium-sized businesses, as well as to idividual customers.
This could and would restore the confidence and goodwill the whole Irish banking sector has lost over recent months, and would also stabilise and stimulate our ailing economy.

The Emerald Islander

Brian Lenihan is meeting Irish Bank Executives to sort out the ever more serious financial Crisis

Today chief executives from the six Irish banks and building societies that are covered by the State guarantee scheme have separate meetings with Finance Minister Brian Lenihan (right).

The series of these one-to-one confessional meetings comes in the wake of the Price Waterhouse Cooper report on the future debts and capital requirements for the six Irish financial institutions covered by the scheme, which was announced by the government in September.

The participants in the talks might be especially cautious, as world markets have once again tumbled, following sharp overnight losses on Wall Street, prompted by a fresh wave of jobs cuts in the USA and another gloomy economic outlook.

But - amazingly - Irish bank shares are among the very few that are rising today. However, one should not forget that on Monday and Tuesday of this week they were hitting rock bottom, with both Bank of Ireland and Anglo Irish Bank shares falling below the € 1 mark for the first time ever. On Tuesday Bank of Ireland shares were even close to 80 cents for a while, and I suppose they could not fall much further without the whole business imploding completely. And - as we have seen in recent weeks only too often - short-term gains on the world's stock markets are often followed by further drops in value.

Today's rises are mainly on expectations that the government is edging closer to a refinancing deal for the nation's main financial institutions.

Earlier this week the Taoiseach had told the Dáil that "the often mentioned recapitalisation of banks alone will not solve the issue of access to credit for small businesses".

During leaders' questions Brian Cowen (above left) said that the government was "looking at a range of measures to remedy the liquidity problem", but he was "constrained in revealing what they are at this time". This was another fine example of procrastination in true Offaly style.

Under the bank guarantee scheme, Cowen stated, all covered banks were drawing up business plans, and this process was now "at an advanced stage". He also announced that the Financial Regulator had received a draft report on the banks from the consultants Price Waterhouse Cooper.

Today the government expects to receive the full business plans from the financial institutions.

Brian Cowen said that if these plans did not contain measures to provide adequate lines of credit to businesses, they would be rejected.

Labour Party Leader Eamon Gilmore (right) declared that the government sounded "like helpless bystanders", while Fine Gael Leader Enda Kenny demanded that the banks be recapitalised.
He reminded the Dáil that 10,000 Irish jobs were being lost every month as small businesses got squeezed.

Meanwhile the International Monetary Fund (IMF) has approved a loan of more than $ 2 billion to Iceland, to help it cope with what has been described as "a banking crisis of extraordinary proportions".
The government of Iceland had asked the IMF for help after its banking system collapsed within hours last month. Let's hope that Ireland will be spared such a traumatic experience.

The Emerald Islander

Bad Times for The Irish Times

It has emerged that The Irish Times is urgently seeking 30 redundancies before Christmas in a bid to reduce the overall costs at the national newspaper, which is one of the three daily broadsheets in Ireland and also a paper of record.

The company's management held briefings with members of staff yesterday morning, to outline a number of cost saving measures, including a pay freeze, a strict ban of bonuses and significant changes to the company's pension arrangements.

Staff who attended this briefing were told that the company is forecasting "possible operating losses of up to € 13 million next year". They were also told that there may be 30 further redundancies in 2009.

More briefings were held yesterday afternoon and staff were told that "revenue from property advertising has fallen by 50% since last year", while "recruitment advertising is down 20%".
However, the staff members were not told which departments would be affected by the 30 redundancies that are being sought immediately.
Management told the briefing that the people involved would be spoken to individually over the next seven to ten days. This kind of secrecy and the attempt to pitch individual staff members against each other and make them fight for being retained is very typical for the stiff and rather old-fashioned culture inside The Irish Times.

An unspecified number of casual staff and freelancers are also to be let go.

It is understood that all aspects of employment terms and conditions will be scrutinised - including the 'nine day fortnight' and the six weeks annual holiday entitlement, as well as the paper's expenses regime.

The management will not be receiving bonuses, and executive terms and conditions will also be examined. This at least seems fair, as management is mainly responsible for the situation of the company.

Staff sources who attended the meetings said that management described current terms and conditions as "relics from another era".
So it appears that after a period of exuberance and uncontrolled splendour these are now also bad times for The Irish Times.

Strangely enough the company had no problems wasting a good deal of money on a new opinion poll regarding a hypothetical second referendum on the Lisbon Treaty, which was published on Monday. (see my entry of November 17th)

If the situation is really as dire as the management suggests, maybe they should start with their staff redundancies right at the top and give editor Geraldine Kennedy the chance to spend more time with her family. She presided over the decline of the paper and did obviously not take provisions for a rainy day when the going was good.
Then the senior management should sack itself instead of pushing hard-working journalists into the dole queue.

With good right we are demanding a change of management from the banks who created our current financial crisis. And what is right for them is equally proper for our big newspapers, who fuelled the boom and spending spree of the past ten years with countless 'lifestyle' articles.

This is the start of a new era, and we should begin the long and slow march to recovery with new people leading the way.

The Emerald Islander

Bank of Ireland Shares fell below € 1

Bank of Ireland's share price is back above € 1 this afternoon, regaining some value after losing more than 15% this morning.
It was the first time ever in the 225 year-long history of the bank that its shares fell below € 1.

The bank's shares were the subject of a significant sell-off after it had announced it was suspending paying dividends in a results announcement last week.

Back in February 2007 Bank of Ireland was valued at more than € 18 billion and its shares were trading at well above € 18 a share. Today the bank's value is barely € 1 billion.

In recent times the bank has seen a collapse in confidence, aggravated by acute concern over its exposure to property lending here.

After the announcement of a 32% drop in profits in the six months to the end of September and the suspension of dividend payments last week, its share price began to drift lower to finish last week at € 1.08.

This morning that suspension of dividends has seen the sell-off gain momentum, with the share price falling to 99 Cents, then to 97 and 93 Cents, and eventually reaching the bottom at 90 Cents per share, before regaining 15 Cents to stand at € 1.05 this afternoon.

Investment funds, which hold the shares long-term to earn income from dividends, have had no option but to sell. But they are selling into a market with no appetite for Irish banks, and where 'short selling', which encourages investors to buy shares at low prices, is the subject of a ban from the Financial Regulator.

Analysts think that some people and institutions with plenty of cash - especially from the Middle East and Asia - might be picking up some of the Bank of Ireland shares at these bargain prices, hoping to make major gains when the banking crisis will be over in some years' time.

As a result of the great drop in value, Bank of Ireland was taken out of two of the Dow Jones index lists today.

For Ireland as a country and the Bank of Ireland as one of our main financial institutions today's development is a further sign of how far things have gone and how low confidence in Irish banks - and in particular in Bank of Ireland - is now. And given the bank's unwillingness to put all its cards on the table and declare its complete situation, there is no silver lining on the horizon for Bank of Ireland.

Brian Goggin (right), Bank of Ireland's group chief executive since 2004, must be living on an entirely different planet than the rest of us.
In a statement issued on Friday he declared that his bank was "strong, sound and successful" and did not see the need to raise additional capital at the moment. Nevertheless Goggin was more than happy to sign up to the Irish government's - which means the taxpayers' - guarantee scheme. The sooner he is replaced by a more capable man, the better.

It is more than time for the government to intervene, and it would also help if the bank's remaining share holders would show some more responsibility. How a man, whose business has dropped in value from € 18 billion to € 1 billion in 18 months' time can say he is "strong and successful" is beyond me. Perhaps he should see a psychiatrist, as there must be something wrong with his mind.

Irish banks have been run by a bunch of reckless dreamers and fantasists for years, and that is one main reason for the current problem. Only radical change from the top down can bring sense and normality back into our financial institutions.

The Emerald Islander

Shock and Awe - Part 2: An Taoiseach

Taoiseach Brian Cowen has made a rather strange statement yesterday. He said that "we are battling the most severe global economic and financial conditions for 100 years".

How does he know that? Did he commission a study into this matter? Perhaps like the one he commissioned into the reasons for the rejection of the Lisbon Treaty by Ireland's voters?

I think not. And no-one else has heard of it either. So how can Brian Cowen have such amazing insight and defining knowledge about economic history? He is no historian, and no economist. Just a humble country solicitor from Offaly with very little practical experience, as he entered professional party politics aged 24 and has not done any normal work since.

So, I ask again: How can the Taoiseach make such a fundamental statement - one for which usually a hundred historians and economists would have to meet over several conferences to agree on research and findings - just by himself and almost off the cuff?

The answer is actually quite simple: Because he is making things up as he goes along.
He does not have a clue about economic history, or economics in general, but he has the bucolic shrewdness often found in people with a rural background. It is the kind of skill one needs when dealing in cattle or horses, or when trying to buy seeds at a bargain price. (There are quite a few of our TDs - across the party lines - who have this trait. After all, Ireland is still predominantly a rural country, and even most of our city dwellers are only one generation removed from farming the land.)

This shrewdness tells Brian Cowen that the Irish people have been successfully hoodwinked into voting for Fianna Fáil for many years, and especially in the last three general elections. So he thinks that he can carry on with more of the same now, except that this time it is not the prep talk of the "great Irish success" and the "we never had it so good".
This time it is pure scaremongering in order to frighten the living daylight out of us. (Maybe someone has told him that it is Halloween...)

And what is all this patronising lesson in homespun economic history in aid of? Only one thing: to promote a very bad Budget and tell us "that government cutbacks cannot be avoided".

This is the second stage of the 'Shock and Awe' concept, originally invented by the Pentagon for the US invasion of Iraq, but now applied by the Irish government to force a half-baked and counter-productive Budget on the nation. (for a detailed analysis - item by item - see my entry 'Shock and Awe - The 2009 Budget' of October 14th)

Cowen lectures us that "we have to change the economic paradigm and policies, but this cannot be done if people oppose every cut that is proposed".

Interesting. Unless he mutated over night into his evil alter ego, I presume this is the same Brian Cowen who told us only a few months ago that all was fine with Ireland. The same Brian Cowen who boasted about the strength of the Irish economy and our "secure finances" before last year's general election. And perhaps even the same Brian Cowen who is now a Fianna Fáil TD for two dozen years, a member of the Cabinet for 16 and Taoiseach for nearly six months.
The very same Brian Cowen who was - as Minister for Finance - responsible for the last four Budgets, and thus responsible for imprudent overspending and generous tax breaks for property developers. This financial policy of Fianna Fáil, supported by the PDs, created the crisis we find ourselves in now.

The very man who created the virus and helped spreading the disease is now presenting himself as the wise and concerned doctor, while he tries to sell us useless medicine at inflated prices.

No, Mr. Cowen, this will not wash! Your deliberate scaremongering does not impress Irish people who have retained their brain over eleven years of Fianna Fáil rule. You have brought this crisis not only on yourself, but on all of us. It did not just appear out of the blue and fall onto this island like an asteroid from outer space.

True, there is a global crisis. No-one denies that. And it certainly has some affect on Ireland and our economy, as these days much business is interlinked across the globe.
But the crisis we are in now is 90% made in Ireland. The way Fianna Fáil - which controls the Department of Finance since 1997 - has wasted and squandered billions while the money was aplenty, was a major factor in the creation of the current situation. Analysts have warned for years that things are going wrong, that concentration on the construction industry and hyped-up property prices are a recipe for disaster.
No-one listened, and least of all the then Minister for Finance: Brian Cowen.

We might well be living through the most serious financial - but not economic - crisis the world has seen since 1929. But that - in my Maths book - makes 80 years and not 100. And, as I have stated here and in many other articles, Ireland needs not to be affected by that in a big way.

Had we had a prudent Minister for Finance and a competent government, we would now have a nice nest egg in form of a sovereign wealth fund, created by the State and accumulated over the years of plenty. Norway has one, and so has Singapore (to mention only two other countries with a population similar to Ireland).
Many countries - large and small - have established sovereign wealth funds when they took in more money than they needed at the time. This is a sensible and prudent way of government.

Only Ireland - under Taoiseach Bertie Ahern and Finance Minister Brian Cowen - decided that the unexpected extra money could only be spent and spent, as the Irish are supposed to be feckless and don't save money.
And not enough with that, the Irish people were heavily encouraged by their banks and by the government to borrow, and borrow more. This went on until a few months ago, and in some ways it is still going on now.

So if Brian Cowen is looking for a reason we are running out of money, a look into a mirror would give him the desired answer.
If he had any guts, he would call an early general election and give the people a chance to decide their future destination. But Cowen is a bully, and - like all bullies - a coward. He will try to hang on to the sinking ship until the water is reaching his ears. In the process he will take many of us down with him.
And - in all fairness - many deserve nothing else, as they kept voting for Fianna Fáil even when their lies and incompetence were clear and obvious, for everyone to see.

The government we have is only there because we elected it. So some "mea culpa (1997), mea culpa (2002), mea maxima culpa (2007)..." is well in order for those who voted for Fianna Fáil and for the Green Party.

But a Brian Cowen lecture on the world's economic history is not. There are plenty of ways to get out of the crisis with dignity and a maximum of fairness. It is time for the government to abandon bullying and scaremongering and turn to these decent methods. (And if they feel not able to do so on their own, they can drop me a line. I would be happy to offer my services as a political consultant and can be contacted by e-mail...)

The Emerald Islander