IMF says Ireland must cut wages - IT

How come nobody ever says that we need to cut profits?

Surely excess profiteering has been as much to blame for “uncompetitiveness” as high wages?

They have a point, If we wait for inflation to do the job for us it could take 15-20 years to regain competitiveness.
however no-one has ever managed to cut wages in an orderly manner as they suggested.

IMHO leaving the Euro is still our best option to regain competitiveness and re-value our debts.


Can you give an example of a firm that is making real profits and is uncompetitive at the same time?

Re-value our debts higher I take it?

Would you rather owe €200k on your mortgage at ECB rates or 300k Irish punts at say Icelandic equivalent interest rates of 10%/11%?


Ryanair would be a good example, if you want to talk about predatory anti-competition but what PtG was talking about was macro perceived uncompetitiveness of Ireland and that would have been all of the profits derived by the IBEC / ISME members during the boom years, that added to the high cost of doing business here.

There was many a supernormal profit made by the Construction industry for example, which translated to high property prices, hence high wages for workers to afford these homes, hence IMF’s cry to cut these wages to become more competitive.

I thought he was saying uncompetitiveness and profits could exist within the same firm.

Yeah, I agree theres no doubt that one firm maximising its profits, through very high prices, can increase the cost base for other firms and cause them to lose global competitiveness. But it would be more accurate to describe that problem as one of excessively high prices rather than excess profits.

For all its faults, Ill take Ryanair anyday over the ripoff Aerlingus/BA duopoly that consigned people like me to the ferry.

You’re confusing the liberalisation of air transport with the now massive public subsidies to the world’s favourite low fare airline. Indeed, Ryanair only got it’s start out of protectionism and not open competition.

It’s a common mistake of course but fire ahead.

Anyway back on topic.

Yes anyone who chooses to pay €100 for a flight with Ryanair rather than €400 with Aerlingus, as it was back in the 80s, is confused.

I must be really confused then.

Quite. :wink:

How does exiting the Euro revlaue debts when the debts are in euros? That’s just shifting the chairs about on the Titanic.

This is only viable if we also default on external debt. I realise David McWilliams is singing this aria but it’s delusional given how much of our debt is external. A new currency will collapse against the euro and dollar leaving our external debt exploding. It gains us a lot of pain unless we also default. I am in favour of debts being paid whether they are mortgages or sovereign. It is the only way of ensuring a credit line.

No. As TUG states above I was referring to the wider Macro environment. Profiteering has been as much of a contributor to the current imbalances in the Irish economy as the high cost of labour. Indeed, the cost of labour could be said to be a direct result of higher prices (resulting from such profiteering) across the board.

My intent was to query why this fact tends not to be acknowledged as having been contributory to our current misfortunes.

You make it sound like going by ferry is some great hardship, but if the weather’s OK it’s a fine alternative, in fact it’s the way to go IMO.
A couple of months back I got the ferry and train via Dublin to Birmingham, a walk on price of about 42 euros, and door to door only maybe an hour longer than flying.
If the ferry companies and train companies in the UK could do more about synchronising departure and arrival times so there’s no hanging around between ferry arriving and train leaving, then a LOT more people would take this option.

Indeed, and if your wages do not rise as a result of the devaluation (which would be the only way to increase competitiveness), what you have is:

  • higher debt costs
  • higher prices (of pretty much everything)
  • cheaper salaries for MNC (expressed in foreign currency terms)
  • some increase in manufacturing for the domestic market (as imported prices are too high?)?

But, for the average person, their debt burden will increase, either as a result of their debts being in foreign currency or as a result of increased bank bailout costs and as a result of having a smaller after tax income once they have paid for the necessities in life.

“The way to go” really? Is there a ferry to Warsaw, Riga, Barcelona, Faro etc?

If it werent for Ryanair Ireland would be cut off from most of Europe. The greedy staff at Aerlingus and BA would extract your last penny from you, if you had to travel to those places.

Get back on topic.

The topic is macroeconomics not transport.

Well why did YOU bring it up then?

Which sort of brings us back to Hudson and the inefficient nature of rentier profits… the profits have been, rather feudally, extracted in the form of rent (i.e. commercial rent) and squandered (on bling, on share jobbing schemes, on further land speculation).

The problem is that the ‘profit’ is gone (having been squandered many times over) and only the debt is left to be repaid, hence NAMA…