The assumptions of that document are wonderful.
Firstly, we’re going to be getting a steady 3% growth in GDP from 2012 onwards. Secondly, there is no talk whatsoever about further losses due to things like NAMA, Anglo, and God knows what other toxic shite that we own. What’s also clear is that at the moment the only thing that’s stopping the country from defaulting tomorrow is the fact that we have multinationals in this country (corpo tax + jobs).
But also that the citizens are ‘rich, rich I tells yis’, at least according to Daniel Gros, director of the Centre for European Policy Studies in Brussels.
All you guys and gals contributing on the ‘euro wedge on the edge thread’ had better watch out. According to Gros the equivalent of 100% Irish GDP is held offshore and if there was access to this money (whatever this means), Ireland wouldn’t have any problem with the bailout conditions.
So despite the low growth, the stability program is stable.
If you are interested in Gros’s presentation to IIEA
A personal observation of the presentation; I don’t know who the IIEA is supposed to represent but all the people around the table (with the exception of Gros) are old, bald, grey and male and I suspect may have been partially responsible for creating the mess in the first place.
My take away points:-
The pain in Spain is yet to come.
The government is subsidising mortgage holders to a great extent unless the individual’s mortgage interest is in excess of the bailout borrowing rate.
To date, euro membership has lessened and delayed the correction necessary to regain access to the bond markets. The BELL countries have had a 20% drop in GDP but are now recovering. By the same metric, Ireland has had an 8% drop with another 10% to go.
It will take over a decade for the current mess to unwind but the secret is to force institutional private sector savers (pensions companies- he didn’t mention insurance companies (i wonder why? )) to sell German bonds and to buy Irish bonds.
So there you have it, how to get out of our problems, force savers to turn gold into shit.
Unimpressive, wasn’t it? Maybe it lost something by being reduced to bullet points?
Don’t forget that to get a 0% growth rate when the government is (supposedly at least) cutting its deficit spending you need to have private sector growth equal to the lost injection of borrowed money.
So if 6bn was taken out of the budget in 2011, the rest of the economy will have to grow by 6% in order to fill the gap. I’m not quite sure if there is a substantial difference between deficit cuts arising from spending cuts and those arising from tax increases, but I don’t think there is because whatever way you spin it, 6bn less deficit is 6bn less borrowed which means 6bn less extra money coming into the economy.
This isn’t an argument against cuts - far from it, I merely want to highlight that the plan is based on private sector growth of perhaps 6-7% to give a 3% overall GDP growth rate. And while the trend for GDP has been on the up based on private sector growth, GNP has been down. So I don’t know, maybe the government is hoping for another €50-100bn in FDI over the next few years.