Ireland’s tax burden is below the OECD average – but personal income taxes are higher
By Sean Whelan, Economics Correspondent
The OECD has been looking at the impact of the economic and financial crisis on taxation.
It’s part of their regular “Revenue Trends” series, with tax data going back to 1965. So what does it tell us? Continue reading
The ECB continues its slow march towards quantitative easing
By Economics Editor Sean Whelan
So, no quantitative easing this month – no surprise there.
But the European Central Bank news conference by Mario Draghi was peppered with references to QE, and a statement from the ECB president that a decision may be taken on using QE early in 2015.
Which, in the long march of the ECB towards QE, counts as another nudge forward. Continue reading
700,000 addresses in rural Ireland will require the state to provide high speed broadband
By Will Goodbody, Science & Technology Correspondent
Rural dwellers and business people could be forgiven for greeting today’s news of yet another plan to roll out state subsidised high-speed but affordable broadband to the non-commercially covered areas with a snort of disillusionment. After all, this by some counts is the fifth such version of a plan which has time and time again failed to deliver a satisfactory result or indeed in some cases any service for thousands of people.
The new plan is only in the early stages. But the idea is this. The Department of Communications, Energy and Natural Resources spent the last year talking to broadband operators about where they plan to build high speed broadband networks between now and the end of 2016. Out of that they have built an interactive map, which county by county, parish by parish, street by street and house by house shows where commercial high speed broadband will be available. And more importantly, where it won’t, because it is not commercially viable. In total, there are 700,000 premises out of a total of 2.3m which need help.
The State’s winding down of its shareholding in AIB could take decades
By David Murphy, Business Editor
You may have heard of somebody talking up shares, but talking them down is less frequent.
That is what Finance Minister Michael Noonan has been doing by describing AIB’s stock as “overvalued” and attempting to prick the bubble in the share price. Continue reading
Irish Water’s failure to communicate its strategy is a key weakness
Here is a question – how much of the Irish Water controversy can be explained by poor communications and the failure to convincingly convey its strategy?
As the Government prepares to unveil its new package of sweeten the bitter pill of water charges next week, it should also consider the company’s public relations.
Contrast the water demonstrations to the reaction to the property tax. There are no protests about the levy on homes, people get nothing in return for paying and for most homeowners it is much more expensive than proposed water fees.
Recently Irish Water replaced its external public relations firm FleishmanHillard with Murray Consultants. But Irish Water continues to fall at the first hurdle despite hiring new expert advice.
This week RTÉ News ran a story that many householders may not be able to claim on home insurance if they get significant water bills caused by a leaks.
Irish Water says it will fix the first leak in a householder’s garden or yard for free. The first leak within a home or the second one in a garden or yard would be the responsibility of the occupier.
Regardless of the merits of its policy, the company has a comprehensive answer to the questions of leaks.
Despite the presence of media advisors, both within and outside Irish Water, the company would not offer an interviewee for television to fully explain its policy on air. Instead it was left to Taoiseach Enda Kenny to articulate the strategy in the Dáil.
It may seem like a minor issue, but it exemplifies why the company continues to lose its public battle. If it does not have the courage of its own convictions and won’t defend its policies why should taxpayers have faith in the organisation?
One of the functions of any chief executive in a company such as Irish Water is to communicate their strategy clearly to the public. The organisation’s boss John Tierney has failed in this regard.
Many of those in the semi state sector held Mr Tierney in high esteem but he lacks the required experience to run a customer-focussed organisation.
Perhaps it is unfair to single out Mr Tierney. It is also a function of the board to ensure the company has a robust strategy and that its plans are articulated.
One of the most fundamental errors made by Irish Water was to assume it would be acceptable to pay bonuses to staff when many of its customers had suffered pay cuts, tax hikes or had lost their jobs.
A striking feature of interviews with anti-water charge protesters is that some of the demonstrators accept paying for supplies but have issues with Irish Water itself.
It highlights the fact that charging for supply is only part of the problem.
The other part is the failure to communicate its strategy in an understandable manner to the public.
Irish Water’s head office on Talbot Street in Dublin does not even carry a logo on its exterior. It is hardly a good first step in building public trust.
David Murphy, Business Editor
Comment via Twitter @davidmurphyRTE
Bono was among the final speakers at this year’s Web Summit
By Will Goodbody, Science & Technology Correspondent
The Web Summit is over for another year. The three day event was broadly speaking a tremendous success for the organisers, the tech community here in Ireland and the wider economy. Time will tell what business was actually done at and around it. But anyone who was in Dublin City over the last week, couldn’t but have noticed the buzz, the people, the packed restaurants and bars, and the smiling visitors.
There were many highlights and memorable moments. But here are five things I’ll remember about Web Summit 2014.
Former finance minister, the late Brian Lenihan
by Sean Whelan Economics Correspondent
The ECB is today examining the release for publication of four letters between Jean Claude Trichet and Brian Lenihan. The letters are from the period October – November 2010, a particularly fraught time for the Euro area in general, and the Irish government in particular.
One of these letters contained an overt threat from the ECB governing council that it would stop funding the Irish banking system if the government refused to go into an EU-ECB-IMF organised bailout.
The other letters are dated 15 October 2010, from Trichet to Lenihan. A reply from Lenihan on 4 November 2010, the 19 November Trichet letter and a response from Lenihan on 21 November, confirming the government’s decision to accept the bailout deal.
That last letter begins “Dear Jean Claude, First let me say that I fully understand your concerns and that of the governing council….”
We know this because it has already been released under Freedom of Information and published by Journalist Gavin Sheridan, who has waged a long running FOI campaign to get these letters into the public domain – a campaign that included an (unsuccessful) appeal to the European Ombudsman, Emily O’Reilly.
In turning down his request for the documents in November 2012, the ECB did give some indication of the contents of the letters:
The letter from Trichet on October 15th “expressed the ECB’s appreciation for the Irish government’s commitment to developing a multi-annual economic and fiscal adjustment strategy (this was the “four year plan” from the department of finance, which later became the “troika Programme”).
It also recalled the rules to which Eurosystem credit operations are subject, as well as the role of the ECB’s governing council in monitoring provisions of emergency liquidity assistance, in particular in the case of large liquidity provisions given to some entities, as this may interfere with the objectives and tasks of the Eurosystem and the prohibition of monetary financing under the Treaty on the Functioning of the European Union”.
This letter was issued about three weeks after Brian Lenihan had met ECB executive board member Juergen Start and EU Commissioner Olli Rehn for secret talks in Brussels about the rapidly increasing costs of Ireland’s bank collapse.
With the initial two year guarantee ending in September 2010, the banks faced a “funding cliff” as they tried to refinance billions of euro worth of bonds that were expiring.
Brian Lenihan’s letter to Trichet on November 4 2010 expressed – according to the ECB’s précis of the letter – “the Irish government’s concerns about the very adverse financial market developments at that time, in relation to the widening of the spread of Irish government bonds vis avis German Bunds and its possible impact”.
This letter was written after the so called “Deauville declaration” by Chancellor Merkel and President Sarkozy, which stated that France and Germany would back the EFSF and EFSM rescue funds, but they would expect bank bondholders to lose some of their money as part of the restructuring of Euro area banks.
Markets reacted very badly to this, and it triggered a huge blowout in Irish bond yields, as investors dumped Irish government paper. These are the “adverse financial market developments” referred to by the ECB.
At this time Brian Lenihan announced the four year plan would entail a new €15 billion adjustment programme, with €6 billion of that front loaded into the 2011 budget. This was to be on top of the €15 billion adjustment that had already happened over the previous two years.
The third letter referred to by the ECB in its FOI refusal to Gavin Sheridan is that of the 19th of November from Trichet to Lenihan. This was written the day after Governor Patrick Honohan’s famous interview on Morning Ireland, when he told the nation the ECB expected Ireland t take a bailout programme, and that the IMF was already in Dublin for meetings that morning.
The ECB says “the letter of 19 November 2010 expressed the concerns of the ECB’s governing council regarding the extraordinarily grave and difficult situation faced by the Irish Financial sector at the time, and its impact on the stability of the Irish financial sector as a whole. The letter also invited the Irish government to take swift and bold action in order to address those concerns.
“In line with the message which it has consistently delivered to the public, the ECB encouraged the Irish government to commit to taking decisive action in the areas of fiscal consolidation, structural reform and financial sector restructuring, including recapitalisation where necessary. Similarly th ECB also asked for reassurance that th Irish government would take the necessary action to ensure that the balance sheet of the Central Bank of Ireland remained protected, in line with the principle that liquidity could only be provided against adequate collateral”.
This last line is particularly significant, as it appears the ECB had severe doubts about the bank assets that had been pledged in return for borrowings from the ECB that amounted to some €140 billion at that point as well as emergency liquidity assistance (ELA) of some €30 billion for Anglo Irish Bank and Irish Nationwide. The ECB was only supposed to lend (including ELA) to solvent banks – i.e. ones they could get their money back from.
Lenihan wrote to Trichet on 21 November, the day the government decided to formally seek a bailout programme from the Troika. Lenihan’s reply states “In relation to points (1) to (4) of your letter, I would like to inform you that the Irish Government has decided today to seek access to external support from the European and International support mechanisms. This grave and serious decision has been taken in the light of the developments I have outlined above (the Deauville declaration, the Greek debt Crisis, ratings agency downgrades, an economic slowdown), and informed by your recent communications, and the advice you have conveyed to me personally and courteously in recent days”.
The ECB was not the only one to to be worried about the country. Olli Rehn recently confirmed on the Marian Finucane show that Timothy Geithner, the then US treasury secretary and former head of the New York Fed had raised his worries that Anglo could trigger an international banking crisis at the G20 summit in Seoul on November 11 2010.
Rehn said he met Geithner, Trichet and German finance minister Wolfgang Schauble in Seoul, and they had agreed that Ireland had to enter a bailout programme to stop the threat of a wider banking crisis.
The following day – November 12 – Trichet reportedly phoned Lenihan and apparently told him then that the ECB could not go on funding Irish banks if the state did not enter a bailout programme.
Over the next few days the Taoiseach and Irish ministers say Ireland is not looking for a bailout, until on Thursday November 18th, Patrick Honohan phones into Morning Ireland from the Eurotower in Frankfurt, and says the ECB expects the government to do a deal with the Troika for “tens of billions”.
Tony O’Reilly was once the biggest player in Irish business – but his fortunes have turned in recent years
By Business Editor David Murphy
For decades Tony O’Reilly was Ireland’s richest man.
He was eulogised as the ultimate Renaissance man: a sporting hero, marketing tycoon and philanthropist. But in June this year, his run of good fortune came to an abrupt halt when State-owned AIB appointed a receiver over some of his assets. Continue reading
Elon Musk was last year’s biggest draw to Web Summit
By Will Goodbody, Science & Technology Correspondent
If technology isn’t your thing then you should probably head off on holiday for the next few days. Because Web Summit is back, and it’s bigger than ever. Which means that over the coming week you are going to be hearing an awful lot about it. About what the next big things in the world of technology are likely to be. About which company is next likely to be bought or floated on the Nasdaq for billions of dollars. About which scruffy young fella in jeans and a t-shirt is likely to be the next tech multimillionaire. And a lot of sentences beginning with, “So…”