The number crunchers won’t vanish entirely

By Business Editor David Murphy

Gerry Adams’s infamous expression about the IRA that “they haven’t gone away you know” is a fitting description for the role of the Troika after Ireland leaves the bailout.

The spectacle of suited economists clutching laptop cases scuttling into the Department of Finance to pore over the books will be less frequent than before.

But the nameless number crunchers won’t vanish entirely. Instead of four “review missions” every year there will be two. That will continue until Ireland has repaid 75% of its Troika borrowings.

Many people take the view that the EU, ECB and IMF poorly designed the loan programme for Ireland. Indeed, the appalling bailout of bank bondholders is a stain on their track record.

However, that does not mean everything they say should be ignored.

The European Commission makes some recommendations in its latest draft report which could help ordinary people.

The document briefly acknowledges that Ireland “has come a long way”. But it lists areas where the Government has missed targets and long-fingered commitments

Social Protection Minister Joan Burton unveiled a host of reforms to reduce unemployment last year under her Pathways to Work plan.

But the Commission says targets will not be achieved to establish so called one-stop-shop facilities for people looking for work. It says there is only one case officer for every 1,000 unemployed people and new case officers will lack training.

It says 30% of spending on job support programmes goes to Community Employment schemes which don’t get people back to work.

Jobs Minister Richard Bruton has lauded the progress made under his Action Plan for Jobs. But the Commission says its impact is unknown.

In a scathing assessment it says schemes to get people back to work, including those aimed at re-skilling and up-skilling the unemployed, “have not been very successful in returning people to regular employment.”

Ireland knows from bitter experience of the 1980s that fixing long-term unemployment is a prolonged and difficult task.

There is a benefit from an outside organisation coercing the Irish authorities to put its efforts into solutions which are effective.

The ministers have been handed a system which isn’t equipped to fix the unemployment crisis.

While Ireland will leave the bailout at the end of the year high unemployment will remain. Politicians and public servants should listen closely to the criticisms of the Troika because much of it is in the public interest.

Should intelligence agencies be able to access stored personal data?

By Will Goodbody, Science and Technology Correspondent

@willgoodbody

Hands up how many people were surprised to learn that US security authorities have access to the phone records and the server traffic of the biggest telecom and internet companies in the world?

The “revelations” in the Washington Post and Guardian this week that the National Security Agency is trawling data relating to non-US citizens on the systems of giants like Microsoft, Google, YouTube and others may have made for strong headlines.

But in reality, it’s likely that many people would be more surprised to learn that the type of trawling carried out by operation PRISM was not going on. Following 9/11, the rules of engagement of counter-terrorism in the US changed utterly. Law enforcement officials secured significant new formal powers, and it is certainly fair to assume that levels of unofficial monitoring of internet and phone based chatter and records jumped too.

However, just because we shouldn’t be surprised that this type of spying is going on, doesn’t make it right that it is. And this latest insight into the murky world of intelligence, where the light of truth and transparency is rarely shone, is sure to re-ignite tensions between those espousing a security agenda on the one hand, and a privacy agenda on the other.

It’s not the sort of publicity that large tech firms like to receive either. In an era of growing threats to digital security and rising concern among users about how secure their data is, data protection is something internet based firms are being forced to take ever more seriously. Tech businesses know this sort of embarrassing story, true or otherwise, can cost them customers and business.

The speedy denials from companies like Microsoft , Google, Facebook, Yahoo  and Apple that they know of or are involved in PRISM,  is testament to these concerns. They claim they only ever give access to their servers to law enforcement agencies that have obtained court orders and do not know of or provide security agencies with “back door” access to the data they store. That’s not to say that such access isn’t going on without their knowledge.

And what of Ireland in all of this? All the aforementioned firms have large presences here. Some like Microsoft and Google have massive data storage centres in and around Dublin. Are these being raided regularly by US spooks and is the data of Irish customers of these firms being examined in the process?

While Facebook’s data protection system does fall under the remit of the Office of the Data Protection Commissioner (ODPC)here because it has chosen to be regulated here, Microsoft and Google’s data storage operations do not as they have not. As a result, the ODPC says it doesn’t know if these facilities for example, are being accessed formally or informally by US security agencies.

We shouldn’t forget as well that Irish and European law enforcement officials have available to them legal tools similar to those in existence in the US, to enable them to have formal access to stored data should they need it. There’s even a clause written into data protection legislation here, permitting any organisation to cooperate with law enforcement agencies that are investigating a serious crime.

Fundamentally, all of this comes down to a simple question? How comfortable are you with government having access to your private data in order to keep you and other citizens safe. Searching for threats online must be a needle in a haystack style task for intelligence operatives. And so in order to find the needle, and protect against threats, one could argue they need full access to the haystack.

On the other hand, should innocent citizens have to allow blanket access to their personal data, on the off-chance that by allowing it they and others may be kept safe?

It’s a conflict likely to remain unresolved, and which will only become more intense as more and more of our affairs move online, and the threat from global terrorism increases.

Thousands of people are in mortgage arrears

By Business Editor David Murphy

They say history repeats itself for those who weren’t watching the first time.

Thus there is a lesson to be learned from the larger-than-expected number of people who registered for the Local Property Tax by last week’s deadline, compared to the poor figures for the €100 household charge.

One of the principles of taxation is that any levy should be equitable.

In the context of property, that means an individual with a big, expensive house should pay more than a person with a less valuable, modest home.

When Environment Minister Phil Hogan announced the €100 household charge in 2011, he broke that principle. In doing so he managed to enrage thousands of home owners who felt it was unfair that a millionaire could pay the same amount as an individual on the average industrial wage.

But unlike the household charge, the Local Property Tax did result in people with expensive properties paying more.

By last Thursday’s deadline, 1.54m homes had submitted a property tax return, compared to the 1 million properties that had registered to pay the €100 household charge six months after its March 2012 deadline.

But it wasn’t only that the unfairness of the household charge that lead to its poor compliance; it was also the fact that it was administered by the Local Government Management Agency instead of the more powerful and experienced Revenue Commissioners.

Interestingly, it is not entirely clear how many households are liable for the property tax.

NUI Maynooth Geography Professor Rob Kitchin argues the true number is close to 1.78 million properties. The Revenue acknowledges that it did not send letter to every liable person but it did write to people in respect of 1.69 million properties.

Even using Mr Kitchin’s figure it still shows that there were returns filed in relation to 86.5% of liable properties.

The lesson from the property tax is not a new one. Taxes have to be equitable otherwise they won’t work.

The principle still holds even if people are being taxed to pay for poor management of the county’s finances leading up to the crash.

It looks like a tablet but feels like and ultrabook

By Will Goodbody, Science and Technology Correspondent

@willgoodbody

Watch the review at: http://www.rte.ie/news/player/2013/0530/3540933-will-goodbody-reviews-microsofts-new-surface-pro/

Is it a tablet? Or is it a laptop? It’s a perplexing question that users of Microsoft’s new Surface Pro are likely to ask themselves.

And one which Microsoft itself is likely to welcome, given that it could potentially allow it place a foot in both markets.

However, there is a danger that a device which looks much like a tablet, but feels and is priced more like an ultrabook, could end up falling between two stools.

At first glance the Microsoft Surface Pro looks much like its more entry level predecessor, the Surface RT. But on closer inspection there are some major differences.

The first and most obvious is weight. At around 2lbs, its magnesium case and what’s inside it is heavy – considerably heavier indeed than the RT and most of its tablet rivals like the iPad and Samsung Galaxy Note and Tab. But in some ways that can be justified because Microsoft are clearly pitching it not just at tablet buyers, but at the ultrabook market too.

The device can take a magnetically attachable keyboard which which is not touch-based, but is fully ‘depressible’ like a normal laptop or PC keyboard. It’s one of the better features of the Surface Pro, and was partially designed by Microsoft’s operations here in Dublin. The downside however, is that it doesn’t come included with the Surface Pro, and that adds a not insignificant €120 extra to the overall price.

The device does, however, come with a pressure sensitive stylus, which has a clever switch on the side, equivalent to a right click on a mouse. The stylus is a handy addition and works really nicely with software that supports pressure sensitivity. The switch also doubles as the means of attaching the stylus magnetically to the power connector on the side of the case, although it can be knocked off quite easily while on the move.

The battery life, while adequate, is far from being the best in the class – although again, much depends on how you classify the Surface Pro. There has also been some criticism of the lack of ports on the device. It comes with only one USB 3.0, a microSDXC slot, headset jack and mini DisplayPort. There’s also Wifi and Bluetooth. But no ethernet port, nor is there any option for an onboard SIM card.

A kickstand on the back can be used for propping the device up when the keyboard is in use. It’s apparently set at an angle of 22 degrees, which Microsoft say is the optimum for sitting on a plane. But it cannot be adjusted to tilt further back, and for tall users, that may well prove a problem.

The screen is a generous 10 inches, and unlike the RT the Pro comes with a full HD display. There are, as you’d expect, two fairly standard level 720p front and rear facing cameras. Under the bonnet, the Surface Pro is pretty powerful, again underlining its pitch at the ultrabook market. It’s powered by an Intel Core i5 processor, has 4GB of RAM and comes with the option of either 64 or 128GB of solid state memory.

Microsoft says the device will run current Windows 7 desktop applications and will integrate with existing enterprise management infrastructure. That’s just as well, because it comes with very little software or apps preloaded. Just Windows Mail and Messaging, SkyDrive, IE10, Bing, Xbox Music, Maps, Video and Games. But as this is a pricey device, pitched at pro users, it’s a valid question to ask why no MS Office?

The device goes on sale on the 30th May. Overall it’s solid, fast & powerful, and uses the Windows 8 touchscreen interface smoothly and to the max. But it is heavy, there is that issue with the kickstand angle and at €879 for the 64GB model, and €979 for the 128GB version it isn’t cheap – particularly given that the keyboard is not included. And it is this, more than any other feature, which is likely to place it more in the ultrabook than tablet market, and ultimately define its level of success.

Tim Cook defended Apple's Irish tax status at a US Senate hearing

By Business Editor David Murphy

On my desk is a computer with a Google search engine (European HQ, Dublin) and Microsoft software (European HQ, Dublin). Beside my PC is an Apple iPhone (European HQ, Cork).

My desk happens to be in Dublin. But it could be anywhere in the world.

About 700 US multinationals employ 115,000 people in the Republic. They are part of the tapestry of the Irish economy.

But now somebody is pulling at the thread and there is a danger it could all unravel.

The hearings by the US Senate into Apple’s tax arrangements and its decision to label Ireland as a “tax haven” puts the State into the same category as countries which charge no tax at all.

In a sense, what matters is not whether this is true but the perception it creates.

It is no surprise that diplomatic engine is being revved up.

The Irish Government is going to use the G8 meeting in Co Fermanagh next month as an opportunity to convince world leaders that there is a big difference between Ireland and the Cayman Islands.

No doubt ministers will point out countries such as Luxembourg and the Netherlands have been offering arrangements attractive to multinationals for years.

The only distinction between those countries and Ireland is that the Republic had the misfortune to be singled out in a US Senate hearing.

Already Apple CEO Tim Cook has retracted his statement that the company secured a deal with Irish authorities on tax. That seems to have followed high level contact from Dublin.

Irish politicians are repeating the mantra that the tax system here is transparent.

It may well be, but the tax structures employed by multinationals certainly are not.

The only credible way for Irish politicians to defend the current system is to show how much tax these companies pay on activities in Ireland. That is far from clear.

But all of this is missing the big picture.

US multinational are exploiting legal loopholes across the globe to reduce their tax liabilities. The movement to try to tackle that is gaining momentum and is being led by the Organisation for Economic Co-operation and Development.

This week 12 more countries ratified an agreement on cracking down on tax offenders.

Ireland will be able to successfully defend its low corporation tax rate of 12.5% for some years. In the long run, however, there is significant risk the existing regime could crumble.

If US multinationals decided to move or reduce their presence here it would significantly dent employment and tax revenue.

Perhaps the Irish authorities should turn their attention to re-orientating the economy in the event that multinationals do pack their bags.

There is no point in hunkering down and saying it will never happen when there is a good chance that it might.

Ajai Chopra has suggested how the ESM could be used to help Irish banks

By Business Editor David Murphy

Enda Kenny and Michael Noonan are getting ready for their lap of honour when Ireland exits the EU/IMF bailout.

But there is still one unresolved issue – it is becoming clearer that banks will need more capital.

In the context of €62 billion already pumped into the system, the additional sums required might be in single digits.

The Central Bank published its Macro Financial Review, which showed there are now €26 billion of mortgages in arrears. That figure includes buy-to-let and owner occupier home loans.

The banks have €9bn of excess capital which they are expected to devour in the coming years as they deal with losses on property loans.

Much of the €26 billion lent to mortgages in arrears will be recouped.

However, a significant proportion will have to be written off and the €9bn of excess capital is unlikely to be enough to fill that gap.

The big question is where will the money come from?

The country is entirely over-borrowed already. The debt-to-GDP ratio is due to peak at over 120%. Many economists believe the national debt is already unsustainable. Borrowing more money and giving it to the banks, as happened in the past, in not an option.

The most obvious solution is to tap the European Stability Mechanism.

Last year the European Council decided that, after a single supervisor for banks was established, the ESM could “recapitalise banks directly.”

After months of promoting the idea, Enda Kenny and his ministers have become curiously quiet on the issue.

Initially the Government hoped it could win funding to compensate Ireland for money it has already put into the banks.

However Germany and others countries have back-pedalled, in the fear that they will be on the hook for bust banks across the euro zone.

But in a recent speech in Dublin the IMF’s deputy director Ajai Chopra outlined some new thinking on how the ESM could be used.

In a nutshell, he said when a State has recapitalised banks and further unexpected losses occur the ESM should be used. Ireland would seem to fit that bill perfectly.

It might quell fears in Europe that the ESM could turn out to be an expensive mistake for Germany and other creditor countries.

Mr Chopra outlined a diplomatically feasible policy which could keep Berlin happy. That would help Ireland show the markets that there will be money available to fix banks without having to increase the national debt.

However, things happen slowly in Europe.

Securing agreement about bank funding from the ESM prior to an exit from the bailout in November would be nothing short of a miracle.

The question of CO2 emission targets is central to debate on the climate change bill

By Will Goodbody, Science and Technology Correspondent

@willgoodbody

Amid the hullabaloo surrounding penalty-point-gate this week, another event in Leinster House, with arguably far greater long term consequences for our future, and the future of our children, got overshadowed.

On the day the people of Moore, Oklahoma began counting the human and economic cost of a terrifying weather event, the Oireachtas Joint Environment Committee began discussing the heads of the Climate Action and Low Carbon Development Bill.

This long awaited piece of legislation sets out to deliver on the government’s stated objective of balancing the challenges and objectives of a low carbon future, with delivering on both environmental and economic grounds.

But much more than that, on a practical level, this will be the framework for Ireland’s contribution – albeit small – to the international battle to contain the seeming unassailable march of climate change.

The draft legislation does many welcome things.

It places a statutory obligation on government to adopt and implement plans that enable the state to transition to what the Department of the Environment describes as a low carbon, climate resilient and environmentally sustainable economy in the period to 2050.

Within each seven year period, the government will have to come up with a fresh roadmap to reach targets, and a progress report will have to be given to the Dáil each year by the environment minister.

There will also be an advisory group made up of experts from various state agencies which will assess and review compliance.

But for many interested observers, the proposed bill does not go nearly far enough.

The biggest issue for most is the absence of any hard or fast targets for CO2 emission reduction, like those adopted by the UK government.

The government here says this is because Ireland already has a binding EU greenhouse gas mitigation target for 2020.

However, many environmentalists and climatologists believe in the absence of any other obvious carrots to bring about a change, the stick is the next best option.

Nor does it raise the bar to a higher target of reducing CO2 emissions by 30%.

That may well be the next target adopted by the EU, depending on how events unfold at the next major intergovernmental climate change conference in Paris in 2015.

It also fails to go anywhere near meeting the aspiration of an 80% reduction by 2050 – the target recommended by the Intergovernmental Panel on Climate Change if a tipping point is not to be reached.

The absence of sectoral targets, particularly in the area of agriculture, climate change experts argue, means that by 2050, up to 90% of Irish emissions could be coming from farming here.

Critics also take issue with the advisory group concept, which they say will not be independent of government, and therefore will lack the clout to break down the walls within the public sector and bring about meaningful change.

The importance of getting this legislation right should not be underestimated.

Over the past century, global temperatures have already risen by 0.8ºC, with the bulk of that escalation coming since the 1970s.

Measured against pre-industrial levels, the rise is actually 1.3ºC. Remember, the IPCC says the point of no return is 2ºC.

It is true that Ireland, on its own, cannot even begin to reach the brakes in the climate change juggernaut, which it appears is careering down the road out of control.

The big developmed countries like the US and China, along with developing states in Asia and South America, are the biggest polluters, and have to lead the change.

But that isn’t an excuse for Ireland to not play its part, by setting a good example. In addition, every crisis creates opportunity.

And in the case of climate change and Ireland, the opportunity is the burgeoning green tech sector here, which holds huge potential for job creation and economic growth.

Plus, any uncertainty about future Irish plans in the area of emissions and carbon cutting would not be good for attracting inward investment.

These, and many other issues, are likely to be teased out over the coming weeks, as the Oireachtas environment committee carries out its analysis.

This week saw the turn of the Environmental Protection Agency, the National Economic and Social Council (which did the policy analysis underpinning the bill) and the Department of the Environment.

But the political temperature, like the global temperature, is likely to rise considerably when other bodies, more critical of the plan, are invited in to have their say.

Michael Martin has just made an important speech staking out radically new policy territory for Fianna Fáil on Europe, Britain and Ireland.  In it he says:

- The economic crisis is so deep the EU can no longer keep watering down agreements to find the lowest common denominator.

- If that means a two speed Europe, the so be it.

- Britain’s in/out debate cannot be allowed to paralyse decision making for the next four years – important decisions must be taken now to restore the economy.

- The EU needs economic stabilisers like the US federal transfer system – if that needs a direct EU tax to fund it, he will support it.

-  Ireland must get ready for a British exit from the EU – every government department should be preparing action plans now.

- Ireland should spell out what it wants from the EU and work with other countries to advance this agenda – it is no longer good enough to drift along with other people’s ideas and tinker at the edges.

Above all he said the Ireland “needs to stand up to the British Tory view of Europe”.

Micheal Martin told the Institute of European Affairs in Dublin that he is convinced a reformed EU is vital to Ireland’s future. But he says the Union is not working the way it is now.  He said the EU does not have an agenda for overcoming the recession, and doesn’t even recognise there is a grave fracture in the union, that its debates are far behind the reality on the ground, and that the EU is fast losing legitimacy among the populations of Europe.

It wasn’t just the British who were targeted – without naming them explicitly it was clear he is ready to have a cut at the German view of the crisis and how it should be dealt with as well.  He said the EU must stop expecting universal austerity to deliver growth. The policy is not working and needs to change.

As for Ireland, he says it needs to adopt a new role in Europe – that of critical friend – not afraid to speak out when it sees things it doesn’t like, and not afraid to advance its own policy ideas and seek out allies to progress them.  This would be a radical break with past Irish practice at EU level.

“Our gradualist and conservative views worked for us in the past, but now we must define what our ideas are”.

The price of keeping Britain in the EU and satisfy the Tory Eurosceptics may well be too high, and this country should be prepared for a British exit.  In communicating to the Irish people he set out a clear party line of opposition to the “British Tory view of Europe”.

He said the idea current among some in London that Britain can leave the EU and enjoy all the benefits of the single market was not on.  And he said the EU risked damaging itself if it allowed Tory policy to dominate debate.

“If we allow those looking for re-nationalisation of powers to dominate the EU  agenda there will be a huge opportunity cost”, he said. The risk is that too much time and energy is spent trying to deal with the British view when it should be poured into dealing with the economic crisis – by developing the Banking Union among other things – as well as dealing with the undermining of democratic legitimacy of the EU, which is being eroded by the poor efforts to deal with it.

“People will be too focussed on trying to keep Britain in rather than deciding what price is worth paying. We need to focus on how the EU can be the driving force for social and economic developments over the next 20 to 30 years, not following the British Tory agenda for hollowing out the EU.”

This new European policy is likely to feature in next year’s European Parliament Elections, when Fianna Fáil will face its first countrywide electoral test since it lost power – and challenges from the left and right that may try and surf on the Eurosceptic waves coming from London.  With some very selective “Brit bashing”, Fianna Fáil will be trying to be both nationalist and European at the same time.

After years of living in the slow lane it appears broadband in Ireland is about to improve

By Will Goodbody, Science and Technology Correspondent  

@willgoodbody

When you see the long running campaign for better broadband, Ireland Offline, offering a hearty welcome to an announcement from Eircom, it’s a pretty clear indication that something positive has happened. And that was the vocal lobby group’s reaction yesterday to news that the Irish telco was ready to begin offering high speed broadband to up to 300,000 homes and businesses in the first phase of its fibre optic network rollout. For those potential customers who choose to avail of the service, it will mean access to up to 70Mbps up, and 20Mbps down, with a pledge of up to 100Mbps later this year as the technology evolves.

There are, of course, some “buts”. Rollout will continue over the next two years, eventually reaching 1.2 million homes and businesses. But even when it is complete there will likely remain many rural locations that will still not be able to avail of the faster network. For those that can access the network, it will mean a significant increase in speed. But because the fibre is only running to a roadside cabinet, not into homes and premises, distance from that cabinet will have a bearing on performance, as the last leg will still be over copper wire. Customers of other operators, whose services piggy back on the Eircom network, will benefit too. But this will be dependent on those operators rolling out their own service offerings.

All in all, though, it is hard to quibble with Ireland Offline’s claim that this is a positive development. But arguably the real story here is the fact that it has taken Eircom so long to get to this point. For years, Irish broadband users have had to make do with, for the most part, second rate broadband services. So much so that Eircom’s rivals, like UPC and Magnet for example, started building their own high speed networks long ago. Credit must be given to current Eircom management for seeing the light and driving the change. For too long, Eircom as the predominant telco in the Irish market, was so consumed with its own financial woes and burdened with debt, that it was unable to get it together sufficiently to upgrade its network to first world standards. The result was undoubtedly an avoidable constraint on the development of ecommerce and the digital economy here.

And the data bears this out. According to the most recent statistics from the European Commission, Ireland is the fourth worst performer when it comes to access to high speed broadband (10Mbps+). As a consequence, it is not surprising that high speed broadband penetration among households and businesses is low compared to many of our European peers. The proportion of next generation lines here as a percentage of overall broadband access is middle of the table, at 20%, compared to above 50% in countries like Romania and Belgium. As a result, the proportion of the population using next generation services here is tiny, at 6%.

Local statistics back that up, with this week’s Comreg Consumer Survey 2013, finding that just 16% of people here have a fixed line broadband speed above 10Mbps. Yet, 1 in every 5 was willing to pay more for faster fixed line broadband.

It’s a clear business opportunity, and one already being leveraged by the likes of UPC, which says it can now offer up to 150Mbps to 41% of homes here. While Magnet says its Fatpipe 70Mbps offering will be available to 250,000 homes by the end of the summer. With Sky already in the mix, and Vodafone announcing its high speed service on Monday, the market is becoming crowded and competitive. And all that is before the mobile operators begin offering 4G services later in the year.

So fasten your seatbelt and hang onto your modem. After way too many years of living in the slow lane, it appears broadband quality in Ireland is finally about to improve. 21^st century communications, here we (finally) come.

ESRI research has called into question the way growth is measured in Ireland

By Economics Correspondent Sean Whelan

Few in Ireland have really taken GDP to be a serious measure of the Irish economy, because of the very large impact that the activities of foreign owned multinationals have on the numbers.  GNP has always been regarded as a more relevant measure.

But now it seems we can’t rely on that either.

Or – for that matter – the balance of payments current account figure, which had been seen as a lead indicator of growing strength in the Irish economy over the past four years.

Earlier this week the ESRI published important new research by John Fitzgerald on the impact of re-domiciled PLCs on GNP and the balance of payments.

For more than a year the Central Statistics Office has been highlighting the distorting effect that these companies – which have moved their registered head office to Ireland for tax reasons, but which conduct little or no real activity here – have had on the GNP figure.

The CSO knew there was something not quite right, but couldn’t put their finger on it.

Prof Fitzgerald has drilled into the CSO data to shed light on the issue, and the findings aren’t at all pleasant.

The money held by these re-domiciled companies – around €7.4 billion last year, or 5.5% of GNP – is enough to distort the figures.

Prof Fitzgerald’s analysis says these inflows had the effect of reducing the recorded amount of profit outflows by multinationals based in Ireland, which had the effect of raising both the GNP figure and the balance of payments current account surplus.

Working back to 2009, when these inflows started – apparently prompted by concerns over the possible direction of the UK tax regime – Prof Fitzgerald finds the economic contraction in 2009 was deeper than officially recorded, and that GNP contracted in 2010, rather than the 1% expansion recorded in the official statistics.

It also impacted last year’s figures, which officially show GNP expanded by 3.5%, but the ESRI analysis says the real expansion was just over 2%.

The impact on the balance of payments surplus is more dramatic.

A surplus on the balance of payments indicates that a country is saving more than it is spending or investing. Usually large surpluses are not sustained, and eventually lead to increased domestic demand as these savings are reduced and spent in the domestic economy.

However Prof Fitzgerald’s research suggests that rather than running a current account surplus of 6% of GNP / 5% of GDP -the real number is less than 1%.  This implies there will be less of a bounce for the domestic economy, as there is not as high a level of savings to be released as future domestic spending as previously thought.

If GNP is smaller than thought, and GNP is a truer measure of the tax base of the economy that is available to support the national debt, then the debt/GNP ratio is worse than thought too.

And as an extra kicker, GNP’s close relative Gross National Income (GNP plus the inflow of profits from multinationals) is the one used to calculate a member states contribution to the EU budget.  And the effect of the re-domiciled PLCs is to inflate GNI – so we have been paying more to the EU than we should have.

But it’s the balance of payments figure that is really depressing.

Professor Philip Lane at Trinity College is quoted in the Financial Times responding to the report by saying “The reality is that the Irish economy’s competitiveness and its ability to pay down its debt is vastly exaggerated in the official figures.”

Writing on theirisheconomy.ie, Prof Lane says:

“…. the Irish national accounts now features two unusual elements:

(a) the large-scale operations of the affiliates of foreign multinationals mean that there is a large gap between GDP and GNI due to the high recorded profits of these firms. Moreover, the high import content of the exports of these firms means that there are analytical issues in understanding the dynamics of valued added in Ireland. To the extent that transfer pricing means that true imports are understated as a means to boost recorded profits, it also means that the trade surplus is overstated (but one-for-one net factor income is understated, so the current account is unchanged)

 (b) the more recent feature is the impact of re-domiciled firms which are counted as Irish firms, since the headquarters are here and even though these have virtually zero domestic activities and the ownership is entirely foreign. As shown in John’s note, this sharply alters the interpretation of the GNI data – but has no impact on the GDP data (which relates to domestic production). It also sharply alters the interpretation of the current account data, which is a key variable in the European Commission’s “macroeconomic imbalances” scorecard.

 So – both GDP and GNI data need to be handled with care. In particular, the traditional short cut of interpreting GNI as a better measure of true domestic activity is not wise – it is an income measure, not an activity measure.”

Davy Stockbrokers’ chief economist Conall Mac Coille has the following take on the ESRI research:

“The 5% current account surplus has been often used as a critical summary statistic of Ireland’s success in rebalancing the economy. The news that the balance, stripping out accounting distortions, is close to 0.5% of GDP will take some of the gloss off Ireland’s export-led recovery story. However, even excluding these distortions, there has been a sharp improvement in the deficit since 2009, up 3% from -2.5% in 2009. And the measurement problem has no bearing on the pace of household saving and debt reduction. So the underlying trends in the Irish economy have not changed. Nonetheless, the revelation that Ireland’s current account surplus may be overstated by 4.5% of nominal GDP illustrates a worrying trend, with volatility in the national accounts  and balance of payments driven by tax accounting strategies.

While point (b) of Philip’s piece has been highlighted by John Fitzgerald, it was the re-appearance of a Google executive before a British Parliamentary committee this week that shone the spotlight once again on the matters raised in point (a): the €30 billion outflow to foreign owned multinationals from their Irish operations that accounts for the gap between GDP (€163 billion) and GNP (€133 billion) last year.

Matt Brittin, Google’s vice president for sales and operations for Northern Europe, got beaten up by the British Commons’ Public Accounts Committee, with much talk of “smoke and mirrors accounting” and “doing evil” over the way it sells advertising in the UK, but books all the transactions from its EMEA headquarters in Dublin.

The company has faced similar, though less colourful, scrutiny in Germany and France (which even contemplated a Google Law to capture some of the revenue raised in France that is declared in Ireland).

And lurking in the background is the big one – the United States – where the Obama administration seems committed to a reform of Corporation Taxes to encourage companies to bring their earnings (and the jobs they generate) back to America.

Remember, the Americans are only beginning their fiscal consolidation process to deal with a debt and deficit situation that’s considerably worse than Europe’s.

But the row over where Google pays its taxes has highlighted another problem with Irish economic statistics – the export figures.

Since 2008 we have been hearing that exports will be the engine of Irish recovery in the Great Recession, and on the surface that has been the case – helped by the recession-proof nature of pharmaceutical exports.

But now, as predicted, the impact of the “patent cliff” – the expiry of patent protection for some high profile “blockbuster” drugs means a reduction in the volume and value of merchandise exports.

This has been offset by the rise of services exports, particularly computer services.  Indeed last year the value of services exports surpassed the value of physical goods exports for the first time.

This trend continued in the first quarter of this year, according to the Irish Exporters Association, with merchandise exports down almost 10%, and services exports up 8%.

It is certainly bad news to see the decline in exports of physical goods – both from the patent cliff and from the effects of the recession in the euro zone (and this is happening despite our supposed gains in productivity – though the Central Bank has long ago cast doubt on those statistics – it attributes most of the gain in productivity to the mass redundancies in the “low productivity” construction sector, which makes the rest of the economy look better).

However should we not also be concerned that the major part of our exports are now reliant on activity that appears to be driven primarily by tax laws here and internationally?

Michael Hennigan of the Finfacts website – a longstanding critic of the distorting effect of tax planning by multinationals on official Irish economic statistics – puts it more trenchantly in this comment on Prof Lane’s Irisheconomy.ie post:

“Google’s global web revenues grew by 29% and 21% in 2011 and 2012 respectively and in 2011, 45% of the total was booked in Ireland. Google Ireland reported revenues of €12.4 billion in 2011; payroll costs were €218 million; corporate tax in Ireland on trading activities was €3 million; total tax charged at €22.2 million including foreign withholding tax. When the Google Ireland’s 2012 accounts will be published this year, they will show revenues of at least €15 billion or 41% of Irish computer services in 2012.

Google, Microsoft, Apple, and commercial aviation leasing, employing about 6,500, account for 52% of Irish services exports.

Up to half of the services exports total of €90 billion in 2012 may be effectively fake i.e. unrelated to Irish economic activity.”

So if GNP, GNI, GDP, productivity and service export figures can’t be relied on to accurately describe the Irish economy, what can?