Letter to several European Commission staff on the topic of the Internal market for Services

Dear sirs/madams,

I am writing to urge you to bring forward a proposal for a new services directive.

 

 

In particular, I am urging you to bring forward a proposal based on mutual recognition of services between member States -as is already in effect for Goods -and which unfortunately had to be removed from the previous services directive.

 

 

Despite that earlier setback, I believe that now is a politick time to bring forward such a proposal again -for 2 reasons. Firstly, unemployment levels across the Union have been climbing and jobs are a focus for most of the Governments across Europe.

 

 

Secondly, and more importantly, the escalating talk of a British exit from the EU gives other Member States a powerful incentive to make EU membership more attractive to the UK. I believe that any proposal for mutual recognition of services will benefit from the desire of the other Member States to entice the UK to remain within the Union. A decision to deepen the services market at this time would be a powerful incentive for the UK to remain within the Union to benefit from access to the emerging services market and also to retain a voice as the rules of the services market are developed.

 

 

Furthermore, those British who are upset by the proposed Banking Union would also be among the main beneficiaries of a services market -thereby giving some political cover for the British Government to cooperate with the Eurozone Banking Union proposals.

 

 

I would suggest a Directive with a strong and universal principle of mutual recognition for services -with a long implementation period, possibly staggered across different sectors. Such a proposal, would be less intimidating to the MSs than immediate universal opening of services.

 

 

In any event, I believe we should use the present angst over a possible British exit to develop the services market. Whatever the UK's ultimate choice, the uncertainty created by their possible departure will be a powerful motivational tool for agreement. Agreeing to launch the services market will never be easy, but right now is as good a chance as we are likely to receive -I think the Commission should seize the chance.

Letter to Simon Coveney

Simon Coveney,

Minister for Agriculture

 

Dear minister,

I am writing to you as the successor to the Minister for Lands. In particular I am writing to you as the owner of lands in Sralagagh, Ballycastle, Co. Mayo (Folio 647f).

 

These lands are burdened by a right of way to allow for turfcutting by individuals. Unfortunately, the road through the land has degraded over many years and is in poor shape. I am not asking for the road to be upgraded to a high standard –however, the road has become quite dangerous in at least two locations, and I am concerned that if nothing is done to rectify this then it is really only a matter of time before a serious accident occurs. The lands are used by turfcutters and a handful of tourists/hunters. Though most are familiar with the road and the dangers of these 2 locations, not everyone is.

 

Therefore, as the landowner, I am asking you to take steps to make the roadway safe. It would not be a big job as there are only really 2 locations that are actually dangerous, and it could save a life someday soon (not to mention legal proceedings against the Minister as landowner). Perhaps also, someday in the future when finances are not so constrained, it would be possible to do a more general improvement on the road, but in the short term, I urge you to address these immediate problem spots.

A clarion call for sceptics of the current bank regulation system

Andrew Haldane, well respected expert in banking and bank regulation has recently delivered a devastating speech in the USA on the topic of complexity in bank regulation. In it, he says that not only has bank regulation become much more complex and expensive (by orders of magnitude) in recent decades, but these exceedingly complex analyses of risk within banks may in fact produce inferior results when compared to simpler regulatory strategies.

This echoes my own thoughts on the matter, and indeed I wrote to the Basel committee on this topic in 2008. The excessive complexity of risk analysis included within regulatory structures is unnecessary and only create loopholes for banks to exploit. Rather, blunt, robust regulation is what is needed.

Haldane goes on to give dozens of examples of risk analysis by banks and regulators where their complex models in key prudential areas are outperformed by simple (occasionally linear) assessments in predicting future outcomes.

This must be incredibly depressing for regulators and banks: they have employed hundreds of thousands of highly qualified staff, at massive expense, to conduct risk analysis within the current complex regulatory framework -and their outcomes are not just poor, but actually underperform simple linear models. To say that it calls into question the current, expensive prudential regime is an understatement.

Haldane is a senior figure in the Bank of England and a respected voice worldwide, his opinions have also been echoed in other quarters -including the former head of the FDIC (and of course myself -only 4 years earlier). His assessment carries weight and it is a welcome intervention in the ever expanding mess that is the current prudential framework.

Haldane is pessimistic that his advocated simpler approach to regulation (focusing on uncertainty itself, rather than pointlessly trying to measure risk to a certainty) will be adopted in international regulation. In particular, he feels the zeal for reform has been defused by Basel III (which is essentially Basel II with more capital). I hope he is wrong, because apart from too many loopholes, Basel II/III incorporate market influenced risk metrics that actively magnify financial crises. These should have been addressed instead of ignored (along with the absurd overcomplexity of these agreements).

My logic is simple. If Basel II did not cause the crisis, then what was the point of Basel III? If it did contribute to the crisis, then why is Basel III essentially the same thing only more-so?

Personally, I go further than Haldane. I don't believe that regulation should focus on trying to prevent bank failures (i.e. ensuring adequate capital for the banks risk profile). This is impossible given the size of the task and the uncertainty inherent in every lending decision. Rather, I think regulation should address the symptoms of bank failures and then simply let them happen. I would leave in place 100% deposit guarantees (for demand or short-notice accounts anyway) and have the deposit protection schemes administered and guaranteed by the Central Banks. In this way, depositors would be assured that their money was safe and bank runs would be averted. More controversially, I would also severely curtail inter bank lending or ownership. For many banks, this would mean a sea-change in their business models. Banking would still be international, but it would be banks themselves that would cross borders, rather than simply capital. The "distribute to originate" (sic) process of interbank lending would end.

This approach basically isolates every bank, leaving the only exposed parties to a bank failure as investors, investment lenders, and the future contributors to the deposit guarantee scheme (in that order). In such a situation, bank failures would cause investors to lose money, but no bank runs and no systemic crises. The cost of protecting depositors would be paid by all banks (and hence depositors) over the long term. Supervisors would withdraw from prudential regulation altogether and let investors worry about it. 

This approach basically abandons all pretence of prudential regulation -whether it is complex (as at present) or simple (as advocated by Haldane). In my view, regulation is more for the reassurance of society than any real positive impact it has on risks taken by banks. Indeed, regulation and compliance has become so expensive that it would need to deliver a high degree of safety to justify its own cost -clearly it has not done so, banking crises are just as frequent now as they were in the era before regulation. The only reason the recent crisis was any less worse than the 1930s was state intervention, not expensive prudential regulation in the pre-crisis period.

http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech596.pdf

Glinsk Hydro project -letter to Mayo County Councillors

Dear Councillor,
I am writing to you about the proposed hydro storage plant at Glinsk -Glenamoy.
I am sceptical of the merits of this plan for the area and the county. I am particularly concerned that the company may fail after a few years, leaving noone to restore the environment in this location.

This project combines a very high environmental impact, with a very speculative business model. High up front capital costs, slow repayment and fast moving developments in rival technologies combine to make this a very vulnerable business model.

On the other hand, the scale of interference with the landscape that is proposed in this scheme is very significant, visible and permanent.
Therefore, I am concerned that if the project fails, or is overtaken by technological or other developments in the energy sector, then we will be left with a defunct, derelict, dangerous and disfiguring plant, which noone will realistically return to its previous condition.

Considering the very limited benefits that will accrue to the locality (a handful of jobs, and possibly a connection to the local grid at some unspecified stage in the future) and the risk of the project failing and leaving behind a uselessly disfigured landscape -I think we should be very sceptical about it.

We need to either establish more convincing benefits for the area, or some sort of provision for cleaning up the site in the event of the project being abandoned. At present, though the project has merit -it has significant risk built into it, which we should address now, before approval, all the time hoping that such preparations will never be needed.

Letter to Phil Hogan about Property Tax

4 Sept 2012
Phil hogan,
Minister of Environment.

Dear Phil,
I am writing to you about a property tax. I am a homeowner in Dublin.
Firstly, I support the intoduction of a property tax. Without rehearsing commonplace observations -a property tax will broaden and stabilise the tax base, without milking already overburdened revenue streams such as VAT and income.
Secondly, I am in favour of the tax being levied in relation to the value of the home. It amazes me how much controversy this has caused -often from people who normally advocate a wealth tax. But to me, it is obvious, that the value of the home, rather than the size, location or whatever else, should be the key determinant of the tax rate. Taxing people with less valuable assets, simply because they occupy more space is not only silly, it is regressive to those living in poorer areas -be they rural or urban. I would particularly like you to identify the property tax as a wealth tax, as I am truly fed up of hearing people talking out of both sides of their mouth on this wealth tax issue.
Thirdly, though I believe the value should determine the rate of tax -I also firmly believe, it must be the value of the site that must be taxed -not the value of the building. If we start taxing people for the value of their buildings/homes, there is an incentive to leave empty buildings derelict. Much like the old "window tax", I feel that a tax on the value of the building will simply lead to people adapting their homes to be squalid and unattractive, delaying upgrades and redevelopment. Much better to tax the value of the site, which ultimately is the value of the locality, rather than the building. Leaving people with the full benefit of any improvements they make by spending money on construction/renovation. Also, Multi-Unit Developments will need some sort of special method of collection in a site valuation tax -possibly via the OMCs.
Fourthly, I am quite opposed to linking these rates to local authority budgets. Local authorities in ireland are extremely efficient at wasting money and should not be given an independent income stream. That's one man's opinion, but it is sincerely held.
Fifthly, I think that non-payment of the property tax (and indeed the household charge) should simply be assigned as a burden on the property with penalties accumulating each year. That sidesteps the issue of having paid revenue staff collecting the money from a hostile public -and what is more, people would hurry to pay it if they felt it was linked to their ownership of the property.
Sixthly, i don't think there should be any exceptions to the property tax. Even if the homeowner is mortgaged, or on a low income, the fact that they own a high value asset should be indication enough of their ability to pay. Income tax reliefs should be for people on low incomes, mortgage interest relief is targeted at those with mortgages -I therefore see no reason to relieve such people from a property tax which is based on the value of the assets they own, quite seperate from their income or debts (and I say this as a low income, mortgaged man). However, i do think that the lowest band of housing should be either exempt or very lightly taxed. People owning homes in low value areas, should not have to pay a substantial tax for the pleasure.
Finally, i think you should move early to announce a target rate of taxation levied from property. If we have 4 months of speculation about how much individual householders might pay, then the psycho brigade in the Sindo will work themselves and everyone else up into a tizzy. I think it would be better for you, and everyone else if you made clear now that there will be x number of tax bands, with a range of rates from Y to Z euros per 1000 euros of site value. Once people feel there is an upper limit to what they may end up paying, they won't be as animated over the whole thing.

Julian Assange's dissembling

A quick summary: Julian Assange, founder of Wikileaks is persona non grata in the United States. Over a year ago, his organisation received a large quantity of confidential CIA documents which expressed US opinions about various countries around the world. This was intensely embarassing for the US as some of those opinions were quite frank. Also, many claim it undermined the safety of individuals by revealing confidential conversations with the US or else simply by giving away tactical or strategic information to the US' enemies. Wikileaks rejects this, by saying it screens the leaks it releases to evaluate the safety to individuals resulting from publication. Assange is wanted in Sweden (who have issued a EAW) for trial on allegations of sexual assault. He has fought his extradition from Britain to Sweden on various grounds (all of them, it must be said were bogus), but now claims that his human rights are endangered, because Sweden might re-extradite him to the United States where he could face the death penalty. He has taken refuge in the embassy of Ecuador, and the Ecuadorean president has granted him asylum in Ecuador. The embassy is currently surrounded by police.

Now, frankly, I think his case is all a load of rubbish. The idea that Sweden might ignore his human rights and extradite him anywhere under threat of the death penalty is absurd. It is not possible for any European country to extradite anyone without assurance that the death penalty is off-limits. Such agreements have never been broken. Indeed, even if Assange was to fly directly to the United States tomorrow, it is unlikely he could be tried for any custodial offence of which I am aware. He is after all a journalist, he did not leak any information, he merely published it. I find it hard to imagine any situation where the US legal system would be able to severely punish him. Indeed, there is more chance of him being prosecuted in the effected European countries (such as Ireland) than of being imprisoned in the US where freedom of speech has a high legal significance.

The real story here is not the phantom threat of his being extradited to the US, but rather the serious allegations he faces in Sweden. His supporters seem willing to dismiss these accusations as merely a plot to discredit him in his role as head of Wikileaks and/or extradite him to the US. However, I am not. Sweden is a stable democracy with an excellent record of policing and impartial justice. It is very difficult for me to ignore their suspicions of Assange, and even more difficult for me to suppose that they would somehow be complicit in a miscarriage of justice to exact revenge for the humiliation of another country (or even their own). Indeed, as a member of the EU, and the area of Freedom, Security and Justice, it is assumed in the UK that a fair trial is guaranteed in the other members of the area (such as Sweden) and that he will not be extradite anywhere at risk of the death penalty.

His extradition to Sweden is just and correct, his human rights are not realistically endangered, his bid for asylum is bogus and the actions of the Ecuadorean President bizare.

Letter to the Minister for Foreign Affairs & Trade

Dear Minister,
I would like to bring your attention to the issuing of passports.

I have just renewed my passport. My old passport had 6 months left to run, but I wanted to get the task out of the way.

My new passport arrived this morning, but I see that the life of the passport is 10 years from now. The time remaining to my old passport was not added to the lifespan of this new passport.

Although it is only a small issue, nonetheless I'd like to see the rules changed in this regard. I have a passport from another jurisdiction, and when I renew there, they give me a new passport for 10 years, plus the remaining time on my old passport. This appears only fair as the period of passport coverage should not have to be paid for twice. That effectively penalises people for renewing their passport early/on time.

I see from the rules that a passport can only be issued for a maximum of 10 years, but I would urge that the rules be udpdated to allow for the preservation of time that customers paid for on their previous passport. It will mean less expense, more utility for the customer and less administration for the passport office.

Household V Business debt -revisited with new numbers

http://www.centralbank.ie/polstats/stats/cmab/Documents/ie_table_a.6_loans_to_irish_residents_-_outstanding_amounts_(incl._securitised_loans).xls

As observed previously, the reduction in private debt in ireland is outpacing the accumulation of public debt. We as a country are more than breaking even and are in fact mending our position (financially at least, the economy is still dire).

However, this reduction in private debt is almost all occuring in the business sector, and households are not achieving any serious improvement in their debt positions.

Between Jan 2009 (the peak of debt) and today (may 2012), households have reduced their debts from 184 billion to 159 billion (14%). Whereas (non-financial) businesses have reduced their debts from 166 billion to 87 billion (48%).

Obviously, a certain amount of this debt reduction in both the household and the business sector is occuring through writedowns, bankruptcies, defaults etc.. I do not have figures to quantify this though.

Nevertheless, the picture is stark. Business has reduced debts dramatically, and they are now roughly half what they were, in just 3 years of austerity. It seems unbelievable to me that this could have been achieved by writedowns alone (indeed the amount of debt reduction is even larger than the total loan loss provisioning of the Irish banks), and a substantial part of it must have come from profits being diverted to paying off debt.

It seems obvious that businesses have access to a significant income stream, that serious profits are being made (despite the continual pleading), and that our tax system (geared towards taxing households rather than business) is increasingly unfit for purpose. It made sense previously, but our low corporation tax is obviously an imbalancing force, which is allowing business to make supernormal profits while households seem to have hardly anything surplus at all with which to mend their positions.

This policy must change. We are in a crisis, we can no longer afford to maintain policies that surrender business tax revenues, placing all the strain on the rest of society. Businesses are increasingly debt free and should not be spared the tax burden that debt choked households bear.

SPQR -Sono pazzi questi Romani

I have in recent months attended 2 meetings of the We are Church movement. On both occasions, the meeting was very slow to warm up, but when it did, it was very exciting.

As said in a previous post, this group, and others like it in other countries, is a group of committed catholics who are questioning aspects of the catechism that seem to conflict with the central christian message. In particular they have identified 5 areas where most catholics would agree the (man-made and antiquated) catechism is wrong and contradicts the christian message.

I have been particularly impressed with one woman who said on the first occasion I was there: " the only thing I can control is myself". Last night she said, "We can't change them (the catholic hierarchy), but we can refuse to be changed by them". This woman is a great inspiration to me, a true revolutionary, using nothing but self-determination to fight the vast Roman church. The humility and confidence of a seemingly frail lady is truly awesome.

I am a little pessimistic that change will come about, but at least I want to be on the right side of the debate. I intend to go back again.

The group is holding a pentecost celebration in the Davenport hotel this Sunday at 3pm.

Grid West consultation 17/5/2012

Grid West consultation 17/5/2012 -http://www.eirgridprojects.com/media/6424%20Study%20Area%20Rationale%20010512.pdf

Dear sirs/madams,

Before making my observations, I would like to express my great excitement at the proposal to develop a high quality grid infrastructure in the NorthWest. This area, for historic reasons, has been one of the poorer areas of the country, with consequently less facilities than the rest of the country. It is a constant struggle to attract industry to the West, and a stable, high capacity electricity supply is one of the most important factors for the future catch up of the region with the rest of the country. I am delighted that you are beginning this process, and I hope that it progresses quickly.

1.       I would like to advocate that the connections built, be of a high capacity. The approval of power lines has become controversial in recent years, and I fear that if an inadequate grid is installed in this process, it will be even more difficult to expand it later, than it would be right now. Therefore, I would urge that the connections to Flagford and Cashla, should be of an ambitious capacity, to allow for future industrial growth, without necessitating a return to the planning process.

2.       I would like to advocate that both connections be advanced simultaneously, or if this is not possible, that detailed planning and permission be sought for both. Even if there is only money for one line, I would like to see the other well planned, and disputes with local landowners ironed out in advance –so that when money does become available, the second line can proceed smoothly and quickly.

3.       If only one line can progress at first, I would advocate Flagford –Bellacorick. The Cashla route already has a direct connection to bellacorick –albeit small- and building this connector will only increase capacity. Whereas, the flagford route, is not replacing a direct connection, and will therefore, not only increase capacity, but improve the robustness of the system too. Flagford seems the most beneficial of the two routes –though, obviously, both should be built.

4.       I am a little sceptical of the future of massive windfarms. I suspect we are experiencing something of a bubble in this area at present. Large scale wind is only one of numerous renewable energies that will be available in future, and it is not at all clear that it will be the cheapest/most successful. I believe that the grid should be designed with the possibility of distributed generation from small scale wind/pv/hydro outfits in mind. We need a grid, capable of absorbing such distributed power sources if and when they become available. I do not have the technical expertise to comment on what would be necessary for large scale distributed generation, but I believe it is crucial we prepare for it as it is likely to become a major power source. In particular, I would like to point out, that distributed generation has a great advantage in terms of access to capital; far in excess of large scale projects. The technology already exists and simply needs to come down in price for a massive increase in this form of power being made available to the grid. We must prepare today for this.

5.       Finally, I would like to point out that a new broadband connection is to land in Belmullet soon. There is scope for data centres and other connection heavy enterprises to develop in Mayo on foot of this. These centres are often very energy intensive, and the sooner this grid is developed, the sooner we can set to work attracting such high end, high profit businesses to the region. I urge that the project proceed quickly.

My guide to happy trails

Years ago, a good friend of mine was embarking on a big backpacking trip. He asked if I had any tips for him. Initially I couldn't think of anything, but later I wrote him an email, and once I got started I realised there are dozens of well-known maxims that are bandied about by backpackers. Here is the list I sent him, no doubt there are many more that could be added to this:

My guide to happy trails


-avoid salad (it's usually been washed in dirty water)

-don't set off with a full pack (you'll acquire some things along the way -either souvenirs or specialised clothes)

-don't trust a stranger who speaks perfect english, especially if they are trying to take you to somewhere i.e. a 2nd location, not of your choosing

-use small bags inside your backpack to divide up the various groups of things in your pack

-time spent regularly organising your pack is never wasted time (you may have to leave in a hurry; especially if it's a lawless place)

-if you're carrying dollars, try to carry small denominations. Poor people rarely have change for a 50.

-if you get into trouble, don't panic, most likely they only want your cash

-smile

-never steal from backpackers or locals, they will probably detect the crime and retribution can be brutal

-remember, tourists naturally attract some of the worst people (conmen, thieves etc.). If you have a bad experience, don't damn everyone because of it, just make sure you find some genuine people.

-avoid arriving into a new town late in the day, and especially if it will be after dark. It's harder to get accommodation and with your pack you are a target for crime.

-Dehydration is the backpackers worst enemy. Between diaorrhea, unreliable water supplies and sweating, you will be constantly under threat of dehydration. This can cause sunburn, constipation, dizzyness and a host of nasties. It's the most common pitfall.

-Guidebooks can be a lifeline when you're stuck for accommodation/food etc., however, some people cling to them so closely that they rarely do anything that's not in the guide. Don't be afraid to go pot luck and find something of your own.

-Don't fall out with your companions (sometimes easier said than done). Cabin fever, heat and exhaustion can make anyone testy.

-If you do get sick, be careful about using anti-diaorrhoea pills. Too much and you can be corked up for a week. Moderate diaorrhoea is harmless enough, constipation can slow you to a crawl. Long bus journeys don't help either.

-If you're using a map in a dodgy neighbourhood, you can step into a doorway or some other relatively concealed spot. Standing in the middle of the street looking at a map is like lighting up 'lost and helpless' in neon lights on your head. Same goes for money.

-taximen are necessary, but don't let them take you somewhere you hadn't heard of before you got into the cab; it's probably their brother's shop where you'll have to buy all sorts of rubbish to get out again. Or it could be somewhere worse.

-Don't buy cheap stuff in your first week, unless you're prepared to carry it for the rest of the trip or else are posting it home.

-No matter where you are, there is always transport nearby, you just have to find it.

-If you get off a bus/train and are besieged with drivers offering to take you somewhere, you're in trouble. They probably have an ulterior motive for driving you. They definitely want to overcharge you. This is an impossible situation; if you work out how to deal with it tell me.

-Some of the best food you can eat is in places filled with locals. It's best if you can watch them fry it. You might get sick, but Western style food outside of the West is often improperly cooked rubbish. Locals can generally cook local dishes well.

-wash your hands before you eat. You are in contact with a lot of things your body has never seen before.

-fruit that you peel is generally safe (bananas, oranges)

-you are not alone. Thousands of backpackers have gone before you. They will swap information about places, pitfalls, travel arrangements, they are your best source of information. They are sometimes interesting too (varies).

-local alcohol is fun, but don't expect to taste anything tomorrow

-Some towns have only one method of transport out of them. They are generally small and nice, but consider if they are unsafe before you put yourself in a cul de sac. Also, make sure you won't have to wait 2 days to catch the next buffalo out of town.

-take a walk in the countryside at least once

-if a place smells like shit, it probably is. It may have an open sewer nearby, you're better off avoiding it if possible. Definitely don't eat there.

-a fan in a bedroom is a simple way to keep away flies (but it can dehydrate you). Opinions differ on air conditioning, although I believe it just prevents you acclimatising.

-incence, tiger balm and other smellies are one of the easiest ways to keep away flies.

-dogs are not the same when you are abroad. they are treated differently by society and they act differently in response.

-a small padlock can be handy in some hostels where you have a locker.

-hiking boots are really heavy. Unless you're going to use them a lot -don't bring them. A pair of light shoes and a pair of sandals is my favoured combination.

-books are heavy too. There will be opportunities to swap books with other people as you go, but be prepared to end up reading slushy romance novels about alien zombies.

-If you have a guide book for one country, you may be able to swap for one about the next country with someone going the opposite direction at the border.

-The most important word in any language is 'pardon'. Even if you can't say thank you to someone who helps you, it's more important to be able to apologise to someone you rub up the wrong way.

-Check ahead to see if there are any festivals or events happening close to your route.

-blogging or regular group emails are a simple way to tell your story to everyone as you go along. It's not for everyone, but it can save you having to recount your story a hundred times when you return.

-Take pictures for your friends to see.

-if you suspect are in trouble you will always have the option of leaving town. Never forget this, as it's often the best and simplest solution to a problem and in a panic you may overlook it.

-swimming is lovely but dangerous. Leaches, water-borne diseases, currents, concealed rocks. Of course you will go swimming, hopefully a lot, but be aware that you are responsible for your own safety, especially in big rivers with fast currents. Some people think that somehow water is less dangerous because they are abroad. I myself have had several near ones by thinking that because a sign or a passing local says it's safe to swim that that means it is totally safe. Water is never totally safe.

-If some backpacker acts as if they know it all, they know nothing (that goes double for me)


You'll probably break almost every one of these rules -and be right to do it in the circumstances. You've got to have a good time in spite of all these cautions.


Talk to fellow travellers. Backpackers are often (not always) very gentle souls with modest personalities and an openness to new things. Some of them have travelled extensively. They are typically good advisers with local knowledge. They have often learnt things the hard way, so talking with them means you can learn things the easy way. They will know the problems you will face much better than anyone writing in abstract can.


Happy Trails

submission to the EU affairs committee about the fiscal treaty

I would like to submit the following in response to your appeal for submissions on the EU fiscal treaty.

Broadly I welcome the treaty itself, but I am extremely sceptical it will prevent future crises and am concerned it will give a false sense of security from the very serious problems which remain in the Eurozone. These problems are I believe unsolvable unless we either leave the Euro or agree to much deeper and more unpalatable common reforms.

Firstly, a body of rules on public debt and deficits is a good idea for each individual Member State (MS). Therefore, as a framework agreement for each MS to implement such rules, the new treaty is I believe a good thing for the Union as a whole. Having sustainable public finances is unarguably a good thing.

However, the calculation of structural deficits is something less than a science, and fiscal rules proscribed by an international treaty are unnervingly inflexible. In cases of extreme adjustment, we will be dependent on our partners to allow us to exercise fiscal room for manoeuvre. I do not doubt that it will be possible to secure such consent if necessary, but it is nonetheless a power over our budget that should not be taken lightly. Implementing this treaty will pose challenges for all MSs -including those who currently enjoy benign conditions. There will undoubtedly be moments when we regret such a significant commitment and even bend the rules for expediency -but in the long run it is a good agenda.

My main problem with the treaty is that I believe it will not fix the much deeper problems of a common currency. I believe this treaty is the result of an incomplete interpretation of the source of the crisis and is addressed to some of the symptoms of the problem rather than the problem itself. It is a stricter form of the ineffective Stability and Growth Pact, which was never implemented, but which in any case would not have averted the crisis that has recently unfolded.

Without embarking on the huge task of summarising the crisis, let me make a few key observations about the crisis before examining how this treaty is likely to impact on future such crises.

This crisis was primarily the result of having a single monetary policy across a diverse union. In every MS, monetary policy was either too tight or too loose. In central Europe, where a decade of sclerotic growth prevailed in recent years, monetary policy was too tight and did not assist in generating activity. However, the problem was far more obvious in the less populated periphery countries, where an overly loose monetary policy led to a binge of debt. In Greece and Italy, this binge was primarily in the public sphere. Taxation collection slid as expenditure rose. The State had access to cheap money and used it. In Ireland and Spain, the overly loose monetary policy fed into private demand and especially construction loans.

Though these problems were different, it is important to recognise that they stem from the same problem of inappropriate monetary policy in individual MSs. The sluggish countries were reducing the capital available to themselves when they needed it most, and instead lending it to the countries that needed to reign in their borrowing -in effect the system made everyone's problems worse. This was predicted by economists long before the currency came into being and it seems their models have been tragically accurate.

As the crisis broke, credit dried up and in Greece this resulted in a crisis in the State finances. In Ireland it led to a crisis in the banks and also amongst individual borrowers who had overborrowed on the strength of a property bubble.

So how does the fiscal treaty propose to fix the problem of a one size fits all monetary policy?

Quite simply it does not. It proposes to control public borrowing only. This will prevent a future Greece. But it will in turn spawn a series of Spains and (Saints preserve us!) a string of Irelands. The fiscal treaty ignores the problem of inappropriate common monetary policy and instead focuses on the symptom of this problem in selected countries -i.e. public largesse. Meanwhile, private lending and borrowing is to be merely monitored, without further restrictions. Indeed, capital restrictions would be anathema to EU law.

The notion that more disciplined countries will not succumb to cheap money in the future when their monetary policy is inappropriately loose is naive at best -Racist at worst. The narrative of the virtuous countries versus the unvirtuous does nothing to explain the crisis and even shames us all. In reality we are fooling ourselves and setting ourselves up for a cycle of boom and bust where private debt bubbles will occur in country after country.

The fiscal treaty cannot easily be extended to cover the private sphere. MSs may agree to limit their indebtedness, but in market economies, the State does not have any useful power to bind private individuals from borrowing from or lending to one another. They can only manipulate the overall level of money available to financiers -i.e. monetary policy. But monetary policy is of little use in the Eurozone, because the money made available to sluggish countries will immediately be lent to the booming countries, making their situation worse.

Therefore, (without trying to be intentionally stark and provocative), I believe the Eurozone has only 4 options:

-A boom and bust cycle where individual MSs all endure periodic collapses, austerity and reform. No country can resist the allure of cheap money and even the "virtuous" will succumb.
-A common budget, issuing common debt and spending without regard to MS borders.
-A move by MSs to a centrally planned communist economy where all financial transactions are controlled by the State and dictated by national economic conditions.
-A dissolution of the Eurozone and a return to free floating currencies.

Given such horrific options, I must confess I favour a controlled exit at the first available opportunity. I write this as a committed Europhile and a great believer in the European project as both an instrument of prosperity and of peace. However, the Euro is not a workable currency, and this treaty does nothing to address this. The Euro is in fact going to destroy European unity and this completely inadequate treaty only serves to highlight the incomprehension of European leaders of the problems that are built in to monetary union.

In summation, I commend the treaty, but nevertheless advocate a withdrawal from the common currency at the earliest opportunity. It is particularly difficult to reach this conclusion when I am aware of how much money and sacrifice Ireland has sunk into retaining Euro membership in recent years -but the alternatives are unthinkable.

Whatever advantages the currency brings (e.g. attracting international investments, reduced transaction fees) is entirely unjustified when you consider the costs of remaining part of it. Noone will want to invest in Ireland while its currency is as inherently unstable as it is now apparent the Euro is. Noone will have faith in a currency that is doomed to boom and bust. Exit is the only sensible strategy.
sincerely
Ger

quantitative easing has been happening unannounced

This blog has previously spoken in favour of Quantitative Easing in the Eurozone.

I am therefore glad to observe that since then, the ECB has embarked on a massive money printing program, lending this money to financial institutions at an ultra low 1% rate.

Though they are not calling this Quantitative Easing -that is exactly what it is, and the relative stability of the markets in the face of what seems like a strong possibility of a Greek default, is testament to the availability of liquidity in the system. This is entirely necessary for the next few years until the burden of debt has shaken down and it is clear who owns what.

Letter posted to Senators prior to a debate on jobs 16/1/12

Dear Senator,
I am writing to you on the issue of jobs. I would like to see a rigorous and more determined effort to create jobs in our economy. Given that all of our budget cuts in recent years have been almost completely consumed by the increase in social welfare payments, it seems that job creation is not only vital for the unemployed, but for the country as a whole.

FORGET ABOUT RETAIL/DEMAND
The way I see it, jobs cannot come from a demand side boom. Talk of restoring old levels of consumption and investment is pie-in-the-sky, while Irish citizens are so burdened with debt and fearful of financial upheaval. I believe all fillips to the retail sector are consequently a waste of time. The sad truth is that we have all consumed and invested far more in the last decade than we were able to afford and we must pay back some of the borrowed money for this previous consumption and investment before there can be a rise in domestic demand. While there are things individual retailers can do to boost their own position, Ireland's recovery simply will not be led by retail -that is a sad but inescapable fact.

COMPETITIVENESS/EXPORTS
Instead, we must focus on competitiveness and the boosting of our ability to trade and export. Our hands are further tied in that we cannot afford to spend any money on job creation, and therefore must focus on reforming our economy (starting with legislation) and also directing our capital budget to those things which will most improve our competitiveness. By competitiveness, I do not mean (as Chambers and IBEC usually plead) lower business taxation or lower workers rights, but reforms tackling unproductive input costs including insurance premia, rents and energy.

LEGAL COSTS/INSURANCE COSTS
Reforms of legal services to reduce costs is a very good place to start as this is a significant burden on businesses, the State and the citizen at large through their insurance premia. Though I have no wish to malign any group working in the legal field, it cannot be denied that this expenditure is out of all proportion to the service provided by our judicial system. The publication of the legal services Bill is an important start, although it unfortunately delays a number of key actions while reports and further legislation is drawn up. I feel this is a mistake, we should include a mandate for the new legal services regulatory body to begin licencing educational institutions and preparing for the introduction of dedicated conveyancers immediately. Furthermore, we should look to urgently reduce the number of remand cases and the unnecessary length of delays caused by remanding of cases. Having courts sit for longer would be a good place to start.

TRANSPORT COSTS
Reforms to transport services will also do much to boost competitiveness. The excessive rents for commercial and residential properties in parts of the country (especially Dublin) is driven primarily by the absence of a good transport system. If it was possible for people to move and commute freely, the concentration of all development in the capital would be reduced and rents (and consumables) would equalise across the region. Businesses would be able to avail of a wider selection of staff and suppliers, consumers/workers would be able to avail of a wider selection of retailers/employers. This would have a dramatic effect on the costs of business and living (even larger than that of legal services). As rents gradually equalised, the spending power of businesses and consumers would rise allowing for either increased consumption, investment or debt repayments (all are to be welcomed).

For this reason, I believe we have made a mistake to refocus the capital budget on schools and construction work. Though schools are obviously necessary, their construction should not be prioritised as a job creation measure. By building schools, we may create more immediate jobs, but once this construction work is complete, the job boosting effect is lost. Whereas with a railtunnel transporting thousands into and out of the city each day, we would be reducing rents and cost of living across the Dublin region and having a long term impact on national competitiveness that would boost jobs in the long run.

I would advocate a realignment of the capital budget back to major transport projects. I would also advocate the sale of both dublin bus and bus eireann (2 profitable companies that will thrive in private ownership and which need to maintain investment levels far greater than they can manage within State ownership for the foreseeable future). I further believe that the DAA should be partially privatised to allow for some external scrutiny of their activities. It does not hurt to include more heads in evaluating major operations like the DAA.

ENERGY COSTS
Finally, I believe strongly that the electricity grid which is currently owned by ESB, but operated by Eirgrid, should be transferred wholly to Eirgrid. As we are about to sell a stake in ESB (possibly the remainder of the company in subsequent years), it is crucial that we transfer this ownership now before we lose ownership. Selling the grid as part of ESB, while retaining the operation of it in another company (Eirgrid), ensures that we will not get the full value of the asset being sold. What investor would be prepared to buy this asset at its full value when they know they will not be allowed to operate it? This is a nonsensical way to sell a grid. If we are truly committed to selling a stake in the grid (I hope not), then at least let us sell it under the ownership of Eirgrid. Selling the asset as part of Eirgrid gives us at least a fighting chance of gaining the full value of the asset -investors will hopefully be willing to pay full price for a share of the grid if they are also buying the right to operate it.

These are merely a menu of options, but I urge you to look at competitiveness as not merely the best, but quite literally the only way out of our present crisis. Restoring credit and/or demand is a fantasy in our current predicament.

Letter to Ajai Chopra about the Legal Services Regulation Bill 2011

Dear Ajai,
I am writing to you again about structural reforms in Ireland's program (see my previous letter about the electricity market). This time, I am writing to you about reform of the legal profession. As part of the program, Ireland has to liberalise the system of training and accrediting legal practitioners in Ireland. In fulfilment of this obligation, the Government has published the Legal Services Regulation Bill 2011.

While there is much in this Bill which is worthwhile, unfortunately on the issue of liberalising the training and accreditation of legal practitioners I believe it comes up short. Both the Memo to the Bill and the Govt press releases alongside it suggest that it is opening up the way for competition between training centres. However, apart from requiring a report to be drawn up on legal training, the actual Bill merely says that the new Legal Services Authority is to keep the provision of training places under "review" (section 9).

This use of the word "review" is quite peculiar. I cannot recall seeing it used in this manner in Irish law before. It appears that far from the new Authority having the power to authorise and regulate the training of lawyers by new and existing institutions, its role will be a more passive one of simply monitoring this process as carried out by the existing training institutions.

This seems to contradict Ireland's commitment under the program. It seems that apart from monitoring the existing institutions, the only proactive thing the new authority will do is publish a report on regulating training -which may or may not be acted upon by later governments.

I believe, this is a mistake, and that instead of waiting for a report to be drawn up and further legislation to be published later (if ever), we should state right now, in this initial piece of legislation, that the authorisation of institutions to train accredited lawyers is to be liberalised and performed by the new authority. We must state this up front, now, to get the ball rolling on this. We have had previous reports on this topic, I see no reason to delay reform while another one is prepared.

Haiku

A scuffed suit
snarling
the cartway

A use of power

Last week I did something that once upon a time I would have scorned. I asked a bouncer to remove a particularly dickheadish customer from a nightclub.

I don't really regret it, I gave him plenty of chances to move himself and ultimately I had no choice but to get him thrown out or to flatten him myself. He wasn't very drunk, just a wanker.

However, there was something very distasteful about it. I was using authority against someone. I was using hired muscle to enforce my will. Worst of all, I was using a bouncer -a mercenary- to do this. It did not feel right, and I am still troubled by it all. Short of actually flattening him, this was the most aggressive approach I could have pursued. Even if he was an asshole, I disliked dealing with him in this fashion.

In many ways, I think a fight would have been a more desirable outcome (at least for me). I have felt despicable all week for strongarming him in this way. At least in a fight, he would have had a fair chance of standing up for himself. He was pretty big and it wouldn't have been an unfair fight.

Perhaps it was laziness, or cowardice, or concern for his wellbeing, or to keep up appearances -but it seemed better to get the bouncer than to deal with him myself. But I wish I had had to do neither.

Letter to Marian Harkin MEP in response to her article on septic tanks

http://www.irishtimes.com/newspaper/opinion/2012/0118/1224310399562.html

Dear Marian,
I am writing to express my support for your recent article in relation to septic tanks. In particular, I am in full agreement that certain people, (especially an Taisce) are using septic tanks to fight a proxy war against rural housing.

I myself am actually a member of an Taisce, but the deep ideological opposition of this group to one-off rural housing baffles me. Indeed, I would go so far as to say that the horrible proliferation of housing estates across the country is a direct consequence of the lobbying of this very loud group against rural housing. Rural people found it impossible to build at home in their own communities and so the demand for new housing on the outskirts of small towns rocketed. Every time I hear an Taisce decry housing estates I cringe -where are people supposed to live if an Taisce is opposed to houses in the countryside and in the town?

It is difficult to share their concerns about groundwater contamination. After all, where do they think livestock and wildlife are relieving themselves if not into the fields and by proxy the groundwater? Nature has the tools to break down the harmful elements, and has been doing so for a long time before we started building septic tanks. An Taisce know this, but use it as an environmental argument against the "bungalow blight" they detest (known as "homes" by the rest of us).

Finally, I'm glad you highlighted the 3 card trick they are trying to pull in relation to Galway's Chryptosporidium outbreak -I would also add that there is stock footage of Duncan Stewart looking at a truly appalling septic tank somewhere. This footage is wheeled out by RTE and an Taisce every time the debate on septic tanks is raised and held up as the typical septic tank. The next time such is shown, it should be named as what it is -a freak plumbing failure, rather than the natural consequence of installing a tank.

sincerely...

Martin Schulz elected President of the EP

http://www.europarl.europa.eu/news/en/headlines/content/20120106FCS34949/3/html/Martin-Schulz-elected-President-of-the-European-Parliament


I'm a little dismayed by this result. Martin Schulz is a very different kind of President to what has gone before in the Parliament. I'm not a fan of his.

I suspect his election has more to do with his nationality (German -at a time when the European institutions are desperate to have german backing) than his political pedigree. Hopefully, he will try to be less divisive and condescending now that he is in office -but I doubt it.

At least some countries show signs of recovery.

http://gregmankiw.blogspot.com/2012/01/liquidity-trap-may-soon-be-over.html

In this recent posting, the always insightful Mankiw points out that US fundamentals are now recovering to the point where normal monetary policy can be restored. Absent a major setback (like a Eurozone disaster), the US economy will recover from being on the brink to merely being anaemic and fragile. Given the scale of our recent travails -that is a comforting thought. This chart seems to spell the end of Quantitative Easing and other various extraordinary measures. Once the fundamentals recover to a normal but low level of activity, the Fed will want to return to its usual interest rate tweaking to manage the economy and keep inflation down.

This is a testament to the success of Quantitative Easing as a policy. Though it will take decades for the Fed to completely reverse its extraordinary interventions in the money markets, those actions have worked and seen the US through a would-be depression. Though they will be cautious about rising interest rates too soon, doubtless the Fed will be relieved to be back in this more familiar territory.

Meanwhile in Europe, noone is in charge.

Jean Pisani Ferry -The trilemma of Eurozone reform

http://www.bruegel.org/download/parent/674-the-euro-crisis-and-the-new-impossible-trinity/file/1540-the-euro-crisis-and-the-new-impossible-trinity/

This is a marvellously clearly written report. It concisely points out the problems with the current Eurozone approach, especially as regards a selective interpretation of the problem focusing exclusively on fiscal rules. It also makes a lot of poignant assessments of policy options and obstacles. It deserves to be read widely.

However, I'm not sure the "Trilemma" hypothesis is a comprehensive explanation of our problems. It explains well the lack of tools we have in confronting credit busts in Euro Area states and it proposes effective alternatives to equip ourselves to resolve them cheaply and more fairly -but does it help prevent credit booms to start with? It's not obvious that it does.

Secondly, though I am very much in favour of highlighting private debt booms as a more significant and thorny problem than the fiscal problems that Eurozone heads are grappling with -nevertheless this "trilemma" does not obviously assist with the problems of fiscal indiscipline.

Rather, I think both public and private debt bubbles should be accorded roughly equal importance in devising regulatory reforms. Indeed, I see the present crises as two sides of the same coin -inappropriate monetary policy in every single Member State (especially the small ones). In some countries this led to public largesse, in others private credit frenzies.

However, though I believe his proposed reforms, in conjunction with the fiscal rules currently under negotiation at Eurozone level, could do much to reduce the cost of private and sovereign crises respectively -nevertheless, the inappropriate monetary policy in each MS would remain. Misaligned incentives would still play on public and private decisions. Capital is either too cheap or too dear in every Member State and people and/or governments will find ways to mobilise it for their own ends. As soon as the ink is dry on these reforms, a continent of people would be seeking ways to bypass them. I fear that having slain these two particular monsters we could find a new hydra's head springing up in a few years time to bedevil us, sprouting from the same warped monetary policy source.

I would wholeheartedly endorse his proposals for breaking sovereign-banking interdependence. What Irish person could disagree with this after the horror of our own disaster? It only makes sense anyway. It also makes sovereign defaults less of a continentwide disaster -bringing credible moral hazard to bondmarkets.

All in all, a cracking read -and in plain, concise language. It presents reasonable ways to deal with credit busts, but I would also like to see something on prevention of credit booms as well.

Frustrating institutional websites

Noone is responsible for noise.

I recently visited a nightclub in Dublin City Centre. The level of noise on the dancefloor was something I have not previously experienced. I am a regular clubber, but I cannot remember before an instance where excessive noise prevented me from enjoying myself in a club. It was extremely damaging to hearing I fear, and even now, 2 weeks later, I have not recovered my hearing fully.

I was moved to try and do something about it. I wrote to the Health and Safety Authority asking them to request the management to moderate the sound levels a bit. I received back a courteous phonecall that told me that the HSA is precluded from intervening in the matter unless a member of the staff complained (like that was going to happen). Though disappointed, I can accept that legislation prevents them from involving themselves in a non-employment related issue. They referred me to Dublin City Council.

Dublin City Council were abysmal. I received another courteous phonecall from an official. However, in contrast to HSA, this was a truly lame attempt at sidestepping. The official told me that their legal advice (I know well the usefulness of blaming inexplicable legal advice) was that they would not win a prosecution if they pursued one against a nightclub for sound inside the premises. They do not do anything unless they are likely to secure a prosecution. He tried to pan me off the Health and Safety Authority (indeed, before he said it, I knew it was going to be his next move).

I did not argue with him (what was the point), but it was a really rubbish response and epitomises Local Government in this country.

1. I was not asking for a prosecution, merely some action by the Council to try and see the law enforced. They could have asked the club to comply in a constructive manner. The idea that they are unwilling to do anything unless it results in a conviction is a pathetically narrow interpretation of their mandate. Indeed, failure to engage with offending parties prior to legal proceedings more or less guarantees they will lose all of their prosecutions.

2. If a prosecution is unlikely to succeed, then there is even more reason to pursue it. Claiming the law is unenforcable, without testing it before the courts is a cop out. If they took the case, and were defeated, at least the state of the law would be clear and the Government would be compelled to pass enforcable legislation.

3. Even if there was no hope of a conviction, Local Authorities are obliged under law to act to enforce the laws for which they are responsible. There is a legal obligation for them to act.

But as usual in Ireland, the interests of the rich nightclub owner trumps that of the man on the street. You can do anything you like in this country if you pay rates. Legal advice consistently echoes the needs of those who pay for it, and there is no way to get anything done.

We are powerless, because in every direction you turn, a wall of dutiful, compliant, fatalistic gateholders block the path of progress.