Wave goodbye to a bad year ... and say hello to one that'll

[rocket1]

Couple of good pieces from Dan White in the Hearld ,pulls no punches

herald.ie/opinion/columnists … 93285.html

Wave goodbye to a bad year … and say hello to one that’ll be much worse
By Dan White, Tuesday January 06 2009

If you thought 2008 was bad, then brace yourself – because 2009 will be even worse.
The economic downturn will get a lot worse before it gets better. Dan White gives his forecasts for the New Year.
Inflation will fall to zero or even lower
With consumer confidence on the floor and commodity prices falling, the annual inflation rate is already dropping like a stone, having halved to just 2.5pc over the past six months.
By early in the year prices will have stopped rising and I expect prices to start falling later in the year.
The Government will be forced to cut the VAT rate
The 6.5pc gap between the Irish and British VAT rates is not sustainable.
With tens of thousands of shoppers heading North every day, Finance Minister Brian Lenihan will be forced to perform a humiliating U-turn and bring the Irish VAT rate into line with the 15pc British rate.

Second 2009 Budget before Easter
With public spending running at more than €10bn ahead of tax revenue the Government will be forced to introduce a second 2009 Budget, probably before Easter.
This second Budget will feature brutal spending cuts. If you think the October Budget was bad, you ain’t seen nothing yet.
The national pay deal will be scrapped
With prices set to fall, the latest national pay deal, which provides public sector workers with a 6pc pay rise over 21 months, is now unaffordably generous.

Public sector pay and numbers will be cut
With public sector pay gobbling up almost two euros in every five of public spending, slashing the €19.6bn public sector pay and pensions bill is essential if the Government is to get even close to balancing its books.
This is likely to include both a reduction in the 372,000 workers currently on the public payroll and pay cuts for those who hang on to their jobs.

House prices will continue to fall even lower
Already house prices have fallen by 15pc from their 2006 peak. Things are going to get much, much worse in 2009.
With rents falling and the banks forcing cash-strapped landlords to sell rental properties, there will be a wave of forced sales in 2009. This will push house prices even lower than most pessimists expect.

herald.ie/opinion/columnists … 93329.html

If Ireland was a company, we’d be bust by now
By Dan White
Tuesday January 06 2009

The disastrous exchequer figures demonstrate that the Government has completely lost control of the public finances. Unless the Government takes strong action quickly we will have to borrow between €16bn and €20bn this year.
If the Irish Government were a company, the insolvency experts would have been called in at least six months ago. Even before the publication of the disastrous full-year exchequer figures yesterday, it was clear that the public finances had gone seriously off the rails.
In 2008 the Government took in €40.8bn in tax revenue. This was €8bn lower than the near-€49bn which the Government had hoped to collect.
Not alone was 2008 tax revenue well shy of the targets set in the December 2007 budget, it was also well down on previous years – 14pc on 2007 and 10pc on 2006. Last year’s tax revenues fell to levels last seen in 2005.
So how could the Government get things so utterly wrong?
Boom
At the peak of the construction and property boom in 2006, the Government was raking in an estimated €10bn on property-related taxes, almost a quarter of all tax revenues. This included stamp duty on the sale of houses and other property, VAT on new houses, the PAYE and PRSI being paid by building workers, corporation profits tax being paid by building and property companies, as well as capital gains tax on one-off property profits.
Last year, stamp duty and corporation profits receipts fell to their lowest levels since 2002. Even more worryingly, VAT and income tax receipts, which had held up reasonably well for most of the year, collapsed in the final quarter of 2008 as the implosion of the building industry intensified.
What this means is that most of the €10bn in property and building-related tax revenues, which the Government received as recently as two years ago, has evaporated.
As the building boom could not last forever, this revenue was always a one-off. Sooner or later, the tap was going to be turned off. Realising the temporary nature of this revenue, the Government should have done the sensible thing and used this money to either pay down the national debt or top up the National Pensions Reserve Fund.
Unfortunately, the Government did neither of these things. Instead, it used this once-off windfall to fund a public spending spree, entering into permanent commitments on the back of temporary revenues. What the Government did would have been a bit like you or me using the money we received from an inheritance to pay for our annual sun holiday rather reducing our mortgage.
While the collapse in property and building-related tax revenues hardly came as a surprise, the speed of the turnaround in the public finances has been truly shocking. As recently as the first quarter of 2008, tax revenues were running “only” 6pc behind the same period for 2007. This had risen to 22pc by the final quarter of the year.

[onestepbehind]

Very straight and somewhat scary.

[thewatcher]

all a bit late though,there were people on here 12 months ago saying this was exactly where we were heading.