''FIG LEAF'' OF AUSTERITY HAS SLIPPED - France yesterday rejoined the list of euro zone economies in recession. The contraction across the whole of the euro zone extended into a sixth quarter, no doubt re-igniting the debate over whether austerity works.

Chris Probyn, chief economist with State Street Global Advisors, says the policy of austerity should at the very least be modified. "The intellectual argument for it was never very strong. The austerity emperor never had a full suit of clothes, just a fig leaf. And that fig leaf has slipped,'' he states.

Mr Probyn said there had been some success from policy measures implemented at a European level, like Outright Monetary Transactions, but they were limited in their scope. "The policies are slowly working on the banking side but it's difficult to generate growth and for that growth to translate into deficit reduction when you are continually beating it down with government spending cuts. The Keynesian would say you need to reverse course entirely. The Troika are slowly coming round to the idea that austerity isn't working."

Chris Probyn said the Irish situation was one of the few cases where had austerity had had an impact. "To the extent that austerity has worked anywhere, its working here because you've used it to restore competitiveness to exports, but growth looks to remain anaemic because of fiscal austerity at home and weaker export markets," he concluded. He recommended putting in place a precautionary line of credit for the end of the year when Ireland comes out of its Troika programme.


MORNING BRIEFS - Pharmaceutical group Elan has told shareholders to reject the latest take-over bid from Royalty Pharma. Royalty submitted a $5.7 billion bid for the firm this month, standing by a reduced price as Elan insisted the company is worth more.

*** Food group Glanbia has reiterated its guidance of 8 to 10% growth in adjusted earning per share for this year. In an interim management statement, the nutritional solutions and cheese company reported revenue growth of 9% in the four months to end April. But it said that challenges remain in parts of the company's portfolio, with market conditions expected to lead to lower year-on-year performances in ingredient technologies and consumer products.

*** Japan's economy grew by 0.9% in the first three months of the year. On an annualised basis, growth came in at 3.5% for the year to the end of March. Those figures will give heart to supporters of the policies of Prime Minister Shinzo Abe, dubbed Abenomics. Aggressive quantitative easing and yen devaluation have been credited with delivering solid returns for Corporate Japan which is forecasting higher profits. However, there is some debate about whether the enthusiasm is translating into other parts of the economy. Wages are flat-lining, while retail sales and industrial production indicators are failing to impress.

*** Corporate governance is the focus of a major conference taking part in Dublin today under the auspices of the Irish Presidency of the EU. A survey of delegates by PricewaterhouseCoopers and Arthur Cox identified culture and behaviour as the biggest challenge for developing a good corporate governance strategy. The conference comes as a debate continues on the lessons of regulatory failings and striking the correct balance between regulation and risk management.

*** Online retailer Amazon is in the tax spotlight in the UK after new figures show it paid just £2.4m in corporate taxes last year on sales of £4.3 billion - that amounts to a rate of less than 0.1%. In fact, it paid almost as much in tax as it received in UK government grant aid.

*** The revelations come as Google faces another grilling over its tax affairs from a committee of British parliamentarians today. Its shares closed at an all-time high of just under $916 in the US last night. That follows its developers' conference which revealed new and upgraded services including plans to send money via Gmail.